Alias names have been used to replace the real names of the clients covered in this case study.

Background

• Long standing clients Mr and Mrs Smith, both in their late 50s
• Assets of c£10m
• The couple have two sons in their late 20s (neither have families of their own at this stage)
• One of their financial goals is to pass on their wealth to their two sons and future generations in a tax efficient manner

Solution

To meet Mr & Mrs Smith’s financial goal, Saunderson House implemented a future gifting strategy and worked with a specialist life insurance broker to mitigate the Inheritance Tax (IHT) liability arising on the second death. To manage the costs of the insurance we mapped out their depleting asset base so that they could insure different amounts at different life stages.

Saunderson House conducted a series of long-term cashflow forecasts with the aim of mapping out their likely remaining assets at ages 80, 90 and 100, based on different gifting strategies; including a provision for school fees for unborn grandchildren.

Cash Flow Forecast

The black line shows expenditure; including tax and in this case includes a property purchase in year one. The bars underneath show where the expenditure is funded from.

 

Liquid Asset Projection

This chart shows how the assets depreciate over time after inflation.

 

 

Having settled on an appropriate assumptive strategy, we then worked out the likely IHT liability at each life stage.

The specialist life insurance broker subsequently built a portfolio of life insurance products on a joint life second death basis, including term insurance to age 80 to cover an IHT liability of £3m, term insurance to age 90 to cover an IHT liability of £2m, and whole of life insurance to cover an IHT liability of £1m.

Results

The couple are now confident that they have cost effective and affordable life insurance in place to cover the majority of their expected IHT liability for the rest of their lives. They also have peace of mind that they have a workable future gifting strategy which allows them to provide for future generations, whilst also ensuring that they retain sufficient assets to cover their own costs.

Get in touch

If you need any advice with passing on your wealth or other financial planning areas, please don’t hesitate to get in contact.

About The Author

Chris Noble
Chris joined Saunderson House in 2003 after graduating from Bristol University with a degree in History. Prior to working ...
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