A forward-looking approach is vitally important when it comes to protecting your clients’ wealth for future generations. Without a proper plan in place, their loved ones could be left with an unnecessary inheritance tax (IHT) bill.
There are various ways to reduce your clients’ IHT liabilities with advantages and disadvantages to each. Some involve giving up control of their assets, complicated legal arrangements or medical underwriting – and they may have to wait several years before they take effect.
One approach is to invest in a portfolio of shares listed on the Alternative Investment Market (AIM) that qualify for business relief. We offer financial advisers a wide choice of investments that can meet their clients’ individual objectives through our ranges of risk-rated model portfolios.
What is AIM?
AIM is part of the London Stock Exchange and is designed for smaller companies seeking capital to expand. Since its launch in 1995, more than 3,000 firms have listed and raised over £60 billion.
Who’s the AIM IHT service for?
Clients who are looking for a government-approved way to protect their assets from IHT as part of their estate-planning strategy and can afford to accept the risk of direct investment into shares in smaller companies.
Clients who are seeking long-term growth but also have the appetite to accept periods of volatile performance that tend to be associated with investing in smaller companies.
What are the benefits of the AIM IHT service?
Straightforward. An uncontentious and government-approved approach for reducing your clients’ tax liabilities that doesn’t involve any complicated legal structures (as with a trust) or medical underwriting (as with an insurance policy).
Effective. Providing your clients have held their shares for at least two years at the time of their death, their investments should be IHT free. Most other forms of estate planning take seven years to become fully exempt.
Efficient. Your clients can hold shares in their ISA and self-invested personal pension (SIPP) so that any dividends and growth will not be subject to income or capital gains tax.
Flexible. Your clients will retain access to their investment and can ask us to sell their shares at any time.
Attractive. Investing in smaller companies listed on AIM offers the potential to grow your clients’ wealth over the long term.
Attentive. On your client’s death, we’ll give their family everything they need by sending them details of their investments along with an information pack.
We have created the Sanlam IHT Service for people who are looking to pass on their wealth efficiently. Investors should only use the service if they are prepared to accept the risks associated with investing in the shares of smaller companies to mitigate their tax liabilities:
Investment risk. The value of your investment can go down as well as up and you may not get back your initial investment. Investing in companies listed on AIM can involve more risk than those listed on the main market of the London Stock Exchange and their share price movements tend to be more volatile.
Relief risk. The tax treatment will depend on your financial situation and tax rules are also subject to change. In addition, the underlying companies must meet certain criteria to qualify for tax reliefs. A company could lose its qualifying status if it changes its business activities, and its shares would then have no tax advantage.
Liquidity risk. AIM-listed shares are less liquid than shares listed on the main London Stock Exchange. Therefore, to obtain the best price, it may take longer to liquidate your portfolio. You can add or withdraw money from your portfolio whenever you want. We will endeavour to sell shares as soon as possible, however, delays can occur when liquidity is unavailable.
Holding period risks. This investment approach has a two-year minimum holding period. Failure to meet this holding period through share sales or death of the investor may result in the underlying tax strategy becoming ineffective.
Our robust investment process provides a consistent framework for building and managing IHT portfolios.
Research. Explore the market in the search for high-quality businesses that qualify for business relief.
Select. Identify shares at attractive prices and build diversified portfolios.
Manage. Monitor the performance of holdings and react to market conditions.