IHT planning Video

Question 1

Estate Planning Fact finding

Answer 1

State of health
Any gifts last 7 years
Made use of annual exemptions both in current and previous tax years
Willing to make gifts out of income or from capital?
Willing to transfer ownership of existing assets to each other or other family members?
Expecting any inheritance?
Plan to give money to charity?
Will to make will or amend existing?
Take out WOL policy

Question 2

RNRB

Answer 2

Not available when assets left to a discretionary trust

Question 3

Loan Trust how it works - unwilling or unable to make out eight gifts as may need access to the capital in future.

Answer 3

• set up loan trust. Settlor established as trustees plus other appropriate trustees
• settlor makes loan to trust. Can ask for it back
• Trustees invest money via bond. Growth is outside the estate not subject to IHT
• money loaned still belongs to estate
• 5% withdrawals (capital repayments) of the original loan amount
• need to spend the income or it falls back in the estate

Question 4

Loan Trust Benefit

Answer 4

Client retains access to capital
It’s very flexible
Growth is outside the estate
Beneficiaries can be selected to benefit
No nil rate band used as it’s not a transfer
No underwriting

Question 5

Loan trust drawback

Answer 5

Loan needs to be repaid and comes back into estate on debt
Income ceases after 20 years
Income needs to be spent.

Question 6

Target Date Funds (how it works)

Answer 6

Foundation phase - invests in low risk assets, low volatility at the beginning
Growth Stage - bulk of AAlocation in equities
Consolidation - 10 years before SRA, equity exposure scaled back
Post Retirement - drawdown stage

Question 7

Benefits of Target Date Fund

Answer 7

Lower cost than tradition active mgt
Benefits from active mgt
Allows for market movement to be taken into account
Volatility managed as SRA approaches
Different date fund can be selected

Question 8

Drawbacks of Target Date fund

Answer 8

Doent takje into account ATR
Investment risk still presenet
AA doesn’t take into account the method of accessing funds
Different providers have different views on AA for each stage of the lifecycle

Question 9

Lifestyle fund

Answer 9

Reduce volatility within the fund in stages as the client approaches retirement
> 10 yr to retirement mainly invested in equities
Gradually changes to lower risk assets
At retirement age fund will be 75% FI and 25% cash
AA changes happen automatically. This locks in gains in equities but doesn’t take into account timing or market performance

Question 10

Lifestyle Fund (Drawback)

Answer 10

Retirement age might change
AA not in line with client objectives i.e. don’t want an annuity
Market timing may be unsuitable
Loss of potential growth if fund not invested in equities
No equities within the fund by retirement age
May not suit ATR
Assumes annuity purchase - not suitable for drawdown
Inflexible switching as its automatic