This Client Situation
A married couple in their early 70s had accumulated a substantial estate valued at over £2 million.
They wanted to pass their wealth on to their children but were concerned about the tax implications upon their passing.
The Challenge
Because the total value of their estate was well over the £2 million threshold, the couple had lost access to the Residence Nil Rate Band (RNRB) allowance.
This created a significant Inheritance Tax (IHT) problem, meaning a large portion of their estate would be lost to taxes rather than benefiting their family.
Furthermore, they wanted to ensure that any wealth passed down was safeguarded against “sideways disinheritance”, such as a child’s future divorce or bankruptcy, which could result in the funds leaving the family bloodline.
documented and protected.
What We Did
To proactively reduce their IHT liability while keeping the family’s wealth secure, we implemented a strategic gifting and trust plan:
- Asset Review: We worked closely with the clients to identify surplus assets within their estate—specifically, capital that they did not rely on for their day-to-day income or living expenses.
- Strategic Gifting: We facilitated the gifting of these surplus assets to their children to begin reducing the taxable value of their estate.
- Utilised Gift Trusts: Rather than making direct, outright gifts (which would leave the assets vulnerable), we placed the gifted assets into Gift Trusts.
The Outcome
By executing this strategy, we successfully started the 7-year clock ticking on the gifted assets.
Provided the clients survive for seven years from the date of the gift, these assets will fall completely outside of their estate for IHT purposes, saving their family a significant amount in future taxes.
Crucially, by utilising Gift Trusts, the children are now fully protected from sideways disinheritance, ensuring the couple’s hard-earned wealth remains securely within the family bloodline for generations to come.
