This article is for professional investors only, and not intended for retail investors.

Advisers often talk to us about how their clients don’t view estate planning as something that is relevant to them, or that they simply believe there are too many negative associations for them to act, meaning they miss out on the benefits of early planning. While some estate planning solutions can provide poor outcomes and don’t reflect a good value service to clients, this doesn’t have to be the case with modern solutions. Here are the most common challenges we come across and how we believe you can support estate planning clients to overcome them and achieve a positive outcome.

Inheritance Tax savings are only possible over time, what if the client dies first?

It’s true that many Inheritance Tax (IHT) mitigation solutions take time to become effective. Business Relief qualifying services take two years, and gifting and trusts take as long as seven years to become effective. With these estate planning options, there is a very real risk that if the client dies in that time, their estate will be liable for IHT on their savings at the rate of 40%, not achieving one of the key objectives of the financial plan. However, this no longer needs to be the case.

With IEP Apex, complimentary insurance cover is provided by the Manager for the first two years. This means that the IHT due on the initial investment value would be covered from day one of share allotment. After that, the investment should qualify for Business Relief, which mitigates the impact of IHT on the investment should the investor die.

Solutions that mitigate against IHT provide no potential for growth

Just because someone is thinking about estate planning, it doesn’t mean they stop caring about their assets having the potential to generate a healthy return. Unfortunately, when a client gifts money to their beneficiaries with the intent of mitigating IHT after 7 years, they are indeed forgoing the potential for any investment growth on that amount.

Ingenious Estate Planning employs a number of investment strategies that aim to deliver carefully managed returns. For instance, IEP Private Real Estate targets a return of 5-7% per annum, net of fees. This means that an investor that might be expecting to live for many years to come may accrue a reasonable return to either provide an income element, or grow the legacy they can ultimately pass on to their beneficiaries, whilst mitigating against the potential impact of IHT.

Clients will have to relinquish control of their assets

Life is unpredictable and your clients’ needs change. Circumstances such as helping out family members, paying for health or social care, or simply living for longer than expected, mean that estate planning clients don’t always want to give up control of their assets. Solutions such as gifts or Trusts often mean limited or no flexibility over accessing the money in the future.

With Ingenious Estate Planning, investors do not have to give away their assets, giving the peace of mind that they have flexibility and access to their savings should their situation change. Investors can draw down the growth generated by the investment, take a fixed amount annually, or redeem their entire investment if need be, subject to liquidity. Please refer to the Brochure and Investor Agreement for full terms and conditions and applicable Exit Fees.

Investments that meet all my clients’ desired outcomes are expensive

High costs of course impact investment returns negatively and so should be avoided. Excessive costs and charges can mean the investment is not the best value for the investor and that the manager is taking a significant benefit.

IEP services have been rated by the Tax Efficient Review* to be among the most competitively priced in the market, and since then, IEP Apex has launched with complimentary insurance cover for the first two years, paid for by the Manager. When it comes to achieving the best outcome for investors with the fairest value, IEP Apex could be the solution for clients who are concerned they will be paying high fees.

Estate planning is only for the super-rich

Many clients might assume that IHT is only a problem for the super-wealthy and that they don’t have enough assets to make any estate planning necessary or worth it. It is important for them to understand the nil-rate band (NRB) – that is the threshold up to which no IHT is paid. The NRB is set at £325,000, with an additional potential of a residence NRB at £175,000 if a property is owned. There are some variations around these allowances for spouses, but put simply this means that upon death, IHT liabilities can kick in on an estate of just £500,000.

IHT receipts are rising steeply, with a 14%** increase between FY 2020 and 2021. This is partly due to the increase in property prices pulling more estates above the NRB and this is set to continue as the NRB is frozen until 2026, making Inheritance Tax a problem for the masses, not just the super-wealthy.

We hope this article will help you to bust some estate planning myths with your clients to help them make the right decision for them. Please download our client-friendly estate planning myth buster booklet to help with your conversations.

*TER June, 2021

**, HM Revenue & Customs, 28 July 2022

Important information

The information, data and analyses presented herein do not constitute investment advice; are provided as of the date written; and are subject to change without notice. Every effort has been made to ensure the accuracy of the information provided, but Ingenious Capital Management Limited (hereafter; ICML) makes no warranty express or implied regarding such information. Nothing within this document constitutes investment, tax, legal or other advice. Our investments are considered high risk and investment decisions regarding them should be made with careful consideration. Except as otherwise required by law, ICML shall not be responsible for any trading decisions, damages or losses resulting from, or related to, the information, data, analyses or opinions or their use. 

Investments with particular tax features will be dependent on your personal circumstances and tax rules may change in the future. Past performance is no guarantee of current or future returns and the investor may receive back less than invested. The price of investments and the income deriving from them can go down as well as up and are not guaranteed. To find the full details of the risk factors and associated mitigation techniques of the fund(s), please refer to the relevant fund documents. Ingenious Capital Management Limited is authorised and regulated by the Financial Conduct Authority under FRN 562563. Registered Address: 15 Golden Square, London, W1F 9JF.