estate planning · inheritance tax £483,512 no gifts made 2 x nrb access and control total access...
TRANSCRIPT
This is just for UK advisers – it's not for use with clients.
Estate planning
Business opportunities
Important information
This presentation is for adviser use only and not for retail customers, and contains some forward thinking statements which should not be taken as fact. Information given is based on our current understanding, as at (04/18), of current taxation, legislation and HMRC practice, all of which are liable to change and subject to an individual’s own circumstances. Terms and conditions of products are available on request. The level of charges may change in the future.
For webex presentations, the event may be recorded for training purposes.
No reproduction, copy, transmission or amendment of this presentation may be made without the written permission from Prudential.
Prudential Distribution Limited is registered in Scotland. Registered Office at Craigforth, Stirling, FK9 4UE. Registered number SC212640. Authorised and regulated by the Financial Conduct Authority.
Any examples included are designed to represent a typical situation and are not related to any particular individual. They do not recommend that course of action.
Learning objectives
By the end of this session you will be able to understand:
Client needs generated from Estate Planning
Planning opportunities from differenttax wrappers and trusts
Investment considerations for trustees and how planning can help
Resources and support available
Estate planning opportunities
EstatePlanning Tax
RetirementPlanning
Later LifePlanning
Legal State
ConnectedFinancially
Inheritance Rax Revenue
0
1
2
3
4
5
6
7
2021/22
2017/18
Projected increase of £1.2bn
£5.0bn £6.2bn
Inheritance tax - estimated number of estates
2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
100% increase over 7 years
30,000
26,000
23,000
19,00018,000
16,00016,00015,000
Trustee Act
Statutory Duty of
Care
StandardInvestment
Criteria
Advice
The opportunity for you…
”Before exercising any power of investment a trustee must obtain and consider proper advice…”
The opportunity for you…
”the advice of a person who is reasonably believed by the trustees to be qualified to give it by his ability in and practical experience of financial and other matters relating to the proposed investments”
An IFA!!
Two objectives
Client
Solicitor
IFA
Beneficiaries
Planning opportunities
Reduce income tax
Reduce inheritance tax
Access and Control
Simplify finances
Income Tax
Bare
Interest in posession
Discretionary
SettlorInterested
Four categories of trust for income tax purposes.
Broadly, whoever gets the income pays the tax!
Capital Gains Tax
Bare Other
Tax and Collectives
No tax within fund
Gains
Trustee paysor
Beneficiary pays
Dividends
No tax within fund
Trustee paysor
Beneficiary pays
Interest
No tax within fund
Trustee paysor
Beneficiary pays
Bonds for Trustees?
No income tax until a chargeable
event occurs
Transferable without a
chargeable event
Simple and flexible?
Meet Margaret
Margaret’s story
Margaret is a sprightly 80 year old, with 4 children and several grandchildren from new born to mid-twenties.
Recently widowed in late 2017 when her second husband Victor died, she is looking to take charge of her finances.
Already a widow when she married Victor she came to the second marriage asset poor but NRB rich.
She’s in a good position to help her children and grandchildren when they need it.
Estate and inheritance tax planning is high on her agenda.
Assets
Last Year
Now
Home Bank Onshore Bond
£900,000
NRB
NRB
Home Bank Onshore Bond
Portfolio
NRB
NRB
NRB£2,065,000
Margaret’s IHT calculation2018/19
Family home £1,500,000
AIM shares £15,000
Savings OEICs £80,000
Equity OEICs £220,000
Bank account £150,000
Onshore bond £100,000
Excess income £17,520
Asset value £2,082,520
Tax free amount £873,740
Taxable estate £1,208,780
IHT payable £483,512
Net estate £1,599,008
Main NRB £650,000
Add Residence NRBAdd BPR relief
£208,740£15,000
RNRB reduction £41,260
Residence NRB (incl spouses) £208,740
RNRB
Tapered
NRB
Max 2
IHT
Full
Access
Margaret’s income
Last Year Now
PENSION£15,000
SAVINGS
INCOME £500
PENSION£42,000
DIVIDEND
INCOME £8,000
SAVINGS
INCOME £2,500
Margaret’s Income Tax calculation
Non savings Savings paid gross
Savings paid gross
Dividends
Pensions OEIC interest
Bank interest
Dividends Tax Due
£42,000 £1,000 £1,500 £8,000
Personal allowance (£11,850)
Non savings 20% £30,150 £6,030
Savings
0% £500 £0
20% £500 £1,500 £400
40%
Dividends0% £2,000 £0
7.5% £0 £0
32.5% £6,000 £1,950
£8,380
Deed of Variation
Trust?
Victor’s NRB
Margaret’s estate
swollen by Victor’s
NRB
IHT due
Discretionary trust
WillIf she dies
Access
If Margaret dies
Margaret and
family
Hey presto, three NRBs
100% to Margaret
Previous Marriage
2 x NRB on Margaret’s death
Recently widowed
Deed of variation for £325,000
1 x NRB inside discretionary
will trust
Margaret
Reduced estate thanks to Deed
of Variation
2 x NRB on Margaret’s death
(thanks to previous marriage)
That’s £130,000 of IHT
Margaret’s Income Tax calculation
Non savings Savings paid gross
Savings paid gross
Dividends
Pensions OEIC interest
Bank interest
Dividends Tax Due
£42,000 £0 £1,400 £0
Personal allowance (£11,850)
Non savings 20% £30,150 £6,030
Savings
0% £0 £1,000 £0
20% £400 £80
40%
Dividends0% £0 £0
32.5% £0 £0
£6,110
Post DoV IHT calculation
2018/19
Family home £1,500,000
Bank account £140,000
Onshore bond £100,000
Excess income £10,690
Asset value £1,750,690
Tax free amount £900,000
Taxable estate £850,690
IHT payable £340,276
Net estate £1,410,414
Main NRB £650,000
Residence NRB (incl spouses) £250,000
RNRB reduction £0
Residence NRB (incl spouses) £250,000
RNRB
Full
NRB
Max 2
IHTFull
Access
Assets
Home Bank
Onshore Bond
Excess Income
Planning matters…
Income Tax£8,380
Higher rate liabilityReduced PSA
Inheritance Tax£483,512
No gifts made2 x NRB
Access and ControlTotal AccessTotal Control
Tax cost!
SimplicityTax return
Multiple wrappers/income types
£6,110Basic rate liability
Restored PSA
£340,276Reduces @ 7 years
3 x NRB
Given up: capital of £100k & growth on £200k
Total Control
No tax return(s)Trust admin simplified
Before After
Resources available
pruadviser.co.uk/knowledgecentre
Oracle publications
03457 11 12 13
Learning outcomes
Client needs generated from Estate Planning
Planning opportunities from differenttax wrappers and trusts
Investment considerations for trustees and how planning can help
Resources and support available
Thank you for your timeIf you would like to give us feedback directly or request information not covered elsewhere please email us at