Tax Advice and Consultancy is one of the most misunderstood and undervalued services we provide for our customers. However, most clients do share a common goal. They don’t want to pay too much tax and they’d like to mitigate tax where possible. But to have a 100% clarity on the tax-saving opportunities, and available tax reliefs, you will need a level of tax consultancy and advice.
And the truth is quality tax advice and consultancy can be life-changing. Here’s how we saved a family £154K Inheritance Tax on their elderly mothers £1.6m estate.
THE IHT POSITION:
Our client had an elderly mother with a terminal illness, who had been living in a care home for 18 months. She had an estate valued at £1.6m. The standard Inheritance Tax rate is 40% for the part of that sits estate above the threshold of £325,000. The client had two siblings, one of which had received a £100K from their mother previously, and was expecting to receive her mother’s jewellery as well as ¼ of the estate.
It’s a very sensitive but important situation that requires careful consideration.
PROPOSAL: Following an initial discussion a proposal was prepared for the client, recommending a specific IHT Consultancy Review of his mother’s estate. IHT REVIEW RECOMMENDTATIONS: A number of recommendations were made around the estate, but specifically the clients need to proactively deal with his mother’s affairs whilst she is alive to make sure his siblings are clear on their positions. These situations can be much more complex and difficult once someone passes away for many reasons, including dealing with HMRC, producing evidence, and that’s not to mention the emotion involved. The IHT report identified specific actions for the client:
Make a lump sum payment of his mother’s excess pension income. This excess income can be gifted to her family without Inheritance Tax being charged, and it can be backdated up to 3 years ago.
Make regular weekly payments of excess income to maximise the position.
Investigate and evidence the situation with his sister’s loan, to determine if it was intended it to be a loan or gift, and how that will impact the distribution of his mother’s assets
THE BENEFITS: The benefits for the client were significant:
Awareness of what he could do to save Inheritance Tax on his mother’s estate now (in light of her age and life expectancy), and the position when she passes away.
Certainty over his mother’s estate and confidence that he has considered all options. He is also clear on whether his mother has capacity which is really important when making gifts, as he has the power of attorney.
Managed risk as the power of attorney, he must take reasonable care to protect his mother’s assets and show his siblings that he is taking care of her affairs. He has sought professional advice, has clear actions and evidences everything in case of challenge or inquiry.
HOW DOES THE CLIENT FEEL NOW?
“The situation with my mother has been very upsetting and difficult for everyone. But then to have on top, the added pressure of deciding what happens to everything she owns. It’s really tough.
But getting this help has been like a weight lifted. We started the engagement on the Thursday, by the Tuesday the initial advice had been provided, and I had a call with an IHT specialist on the Wednesday. I finally feel like I have control of the situation, and I’m as comfortable as I can be with the future. I just wish I had had this conversation 6 months ago.”
NEED HELP WITH A TAX ISSUE?
For DTX'ers who have a client a tax issue you’d like to discuss and you think you might need specialist advice, don’t wait, get in touch and let us help you.