Today we address the methodology for what is the best way to avoid inheritance tax.
At some point in their lives clients activate the trigger – the idea comes to them about their inheritance tax problem and how can they resolve it. Regardless if you are a parent or a child, the moment comes when you become aware of the inheritance tax problem and the question “How do I avoid inheritance tax?” arises. And therein lies the problem. It's fundamentally the wrong question. Finding the right question to ask can start you down a slightly different path.
So, what is the correct question? It should be “How do I retain wealth in my family?” That's a much wider question. If all we're doing is avoiding inheritance tax, that's relatively straightforward. But it's the impact of the wealth and the money that you leave to your family that's important. Let's say, you end up paying a lot of capital gains tax or stamp duty land tax - it's still a drain on the wealth. It may not be inheritance tax, but it still is a drain on the wealth. Let me give you an example. Let's say you walk down the high street and you saw any financial advisor. They could say to you: “This is relatively straightforward. I've calculated your problem and by the time you die, looks like you're going to have an inheritance tax bill of around half a million pounds. So, we just need to put this life insurance into place. And when you die, the half million pounds will be available to pay. And that's it. It's as simple as that.” You may think that's straightforward and that's what you do. Ten years after you die, you've left one and a bit million to your children for example and one of your children walks into a divorce court. What happens to the money? If you've left them a million, then effectively half of that money is going to walk. Did your plan work? The answer is no. You may have effectively avoided the inheritance tax, but your children still lost a lot of money. And this isn't what you were trying to achieve.
Now let's presume you go down the right path and you ask the right question, what happens then? People fall into two main areas and it's what I call a normal distribution bell curve. On the one hand, some people recognise their problem and they find someone to help with it. On the other hand, are the people who will start doing some detailed research and spend hours, days, weeks, months and sometimes years doing that research and putting it off and putting it off, just trying to understand it all themselves. And it is a very rare occurrence to come across anybody who understood it well enough to be able to make the right decisions. You really need to be doing this full time. Even professionals and even after the length of time they’ve been doing financial planning, most weeks they find some tiny little nuance, which is a slight adjustment in what they knew before.
So, what about those people who then go down the DIY (Do It Yourself) route? The honest answer is that almost definitely they are going to fail to do it effectively. They may be able to reduce their tax and maybe even protect their families to a degree. But would they have a fully effective plan? Almost impossible.
And what about the people who did no research at all? They just jumped straight in for help and there are some issues to that approach as well. Even if you get a great advisor and you get all the advice, you still may end up not understanding that advice and being unable to make the right decision because you didn’t do your research beforehand. And therefore, you're fully dependent on the person who's advising you as to what the right thing is for your family. That may not actually be the case. The best approach to effective financial planning is somewhere in the middle – the knowledge that you will not be able to understand the intricacies of financial planning in detail and you will need some help. You will also need to do some research. I would strongly suggest that you download our eBook and you read it – it is comprehensive and probably about an hour's read. It contains lots of useful links to videos on my YouTube channel and it will help you put your information in a structured manner, so it's easier to learn. If you do that - read the book, watch the videos that are in there - you will have a good understanding of estate planning and inheritance tax to enable you to then to move forward and get advice.
When you get advice, what should you do? First, you can get three different forms of advice from three different types of firms. You could go to a very good firm of lawyers who may charge you £400/hour. And certainly, those good lawyers who are specialists in estate and inheritance tax planning, will be able to guide you properly on the use of trusts. And they will also understand the tax implications of trusts. What they won't understand is the financial aspects - what about business relief plans? Which plans are better and which plans and worse? What about equity release plans? That's not what they deal with and you'd have to go to a financial advisor. When you go toa financial advisor, they'll understand the financial products, and a good financial adviser would even understand the tax implications of trusts and things. But they would have no real understanding of the whole legal frame work of trust and how it all fits together properly for estate planning. They would refer you to a lawyer for that. And you may find yourself stuck between those two firms. And what about a tax accountant? Certainly, the tax accountant would understand that quite well. They would even probably be able to advise you on Family Investment Companies and things like that, which a financial adviser very rarely understands. So, unfortunately, you need all three.
What's the solution? You have to find a specialist advisor who understands all three. And that's exactly what we provide in Bluebond. It's taken me years to understand the legal side, the financial side, and the tax side. And therefore, we can help you to move forward and make the right decision. What we will do is we will help you put together a proper structured plan, taking into account all three aspects. And when you've got that plan, we will then recommend suitable lawyers to put in the trusts, financial advisers to deal with anything that comes under regulated FCA framework and tax and specialist lawyers to deal with Family Investment Companies and partnerships if the corporate route is right for you. We would help you put the whole plan together under Bluebond Tax planning and then we'd get the specialist firms to actually help you implement it. What does that mean and how much does that cost? If you look on our website, you will see that we charge a very low initial fee. We have what I call an unmatched offer. We not only give you your advice in full, but we agree to have unlimited meetings with you. If you look at the fee, you see it is extraordinary value for money. Why do I do it this way? Because I've been helping people with estate planning for over 18 years and I know that eight out of 10 clients proceed. It's a great offer and it’s something worth doing. If you want to book a meeting with us, go to our website and book that meeting. It's a free 30 minutes and we'll explain what we can do for you and move forward.