Case Study 2 Q And A Flashcards
Factors to consider when reviewing savings and investment at annual review x7
Market changes
Legislation changes
Changes to tax status, income, expenditure, inheritance,
Changes to objectives, goals, needs, lifestyle, health
Charges
Investment performance, asset allocation
New products on market
Actions to reduce IHT liability (gifts) x5
£3,000 annual gift exemption and last years if not used
£250 small gift exemption
Gifts to political bodies and charities
Gift to individuals and trusts as outside estate after 7 years
Gifts from normal expenditure and income
Actions to reduce IHT (other) x4
Use of life cover to cover IHT liability
Use of loan trust and gift trust
Use of investments that give business relief after 2 years (EIS)
Pension contributions
Benefits of a loan trust x3
No immediate IHT saving
Growth of funds outside of the estate
Outstanding loan only forms part of the estate on death
UFPLS income tax treatment x5
25% of withdrawal tax free (£9,500)
75% subject to income tax
If BRT this is 20%
Taxed on 1 month basis which means too much tax may be paid and can claim back via self assessment
Entire £38k treated as a BCE for lifetime allowance purposes
Impact of sabines first husband leaving everything to her and how to avoid x5
If Stefan dies first, sabines executors can apply for his NRB
Can only have 1 extra NRB
On Stefans death, have in his Will to create a discretionary trust up to his NRB
Sabine beneficiary and trustee of trust
Uses stefans NRB and on sabines death her executors can apply for her deceased husbands NRB
Disadvantages of UFPLS to provide pension income x6
Reduces SIPP value
Value can decrease greatly if taken at bad time (pound cost ravaging)
May need to reduce UFPLS value in future
SIPP charges
No benefit from mortality gain
Need for ongoing reviews
Advantages of UFPLS for income x4
Funds remain invested and can benefit from growth
25% of withdrawal is tax free
Find can be inherited
Level of income can be altered
Stefan dies first, to protect the interests of his daughter Emilia what can be done? x5
Immediate post death interest first created in will
Allows Sabine to take an income during her lifetime
Emilia will be the remainder man and can inherit the capital funds on sabines death
Only stefans assets in his own name can be used this way
Uses spouses exemption
Disadvantages of crystallising SIPP to purchase lifetime annuity x5
Income cannot be reduced unless flexible annuity taken
Widowers benefits may not be suitable
Annuity rates may be higher in the future
Find cannot be inherited
No benefit from investment performance
Advantages of crystallising SIPP to purchase annuity x10
No need for ongoing reviews
Guaranteed income for life
May suit ATR
Reduces charges
Escalation and indexation
No investment risk
Widows benefits
25% of find as PCLS
Mortality gain
Guarantee period
