Freeing up a windfall whilst minimising inheritance tax

An already wealthy client inherited £100,000, which he wanted to invest, however the amount was set to add some £40,000 to his children’s inheritance tax liability.

We advised him to implement a deed of variation, which effectively rewrites a will so that a different beneficiary can be nominated, then set up a trust benefiting him and his children, with the trust fund the new beneficiary of the will.

This trust was drawn up by a specialist solicitor and included a clause enabling the client to have an interest free loan for life of £100,000. This meant that he could now use the original inheritance amount as he wished, with it becoming a debt against his estate on his death and therefore free of inheritance tax liability.

A FULL AND COMPREHENSIVE MEETING NEEDS TO BE CARRIED OUT AND FULL FACTS OBTAINED ABOUT AN INDIVIDUAL’S CIRCUMSTANCES IS UNDERTAKEN BEFORE ANY RECOMMENDATION IS MADE. THIS EXAMPLE IS NOT A RECOMMENDATION.

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