Estate planning that’s effective quickly

Planning ideas to help clients target fast relief from inheritance tax.

Helping clients who want inheritance tax relief quickly

Traditional estate planning typically takes seven years to become free from inheritance tax. Most clients start considering their estate later in life, and seven years is a long time to wait to know their plans are effective.

An investment that qualifies for Business Property Relief (BPR) takes just two years to become free from inheritance tax. As long as clients are comfortable with the risks of BPR investments, this can be an attractive option for elderly clients or clients in ill health. And it also brings interesting planning opportunities for clients who’ve sold a business, or those who want to use trusts as part of their estate planning. Read more about the risks.

Let’s look more closely at planning ideas that could help clients plan for inheritance tax relief that’s effective sooner.

Planning ideas

Planning ideas for clients

Late estate planners

Scenario

Later-life clients can feel they’ve left it too late to plan for inheritance tax. At this point, approaches like gifting or life insurance may not be attractive.

Opportunities

Clients could pass on more to loved ones after just two years by making an inheritance tax-efficient investment. This is faster than making a lifetime gift, which typically takes seven years to be effective.

Solutions

BPR-qualifying investments

Recently sold a business

Scenario

Clients who are planning to sell or have sold their business could find that the proceeds become liable for inheritance tax. While a client could typically pass a family business to loved ones free from inheritance tax when they die, proceeds won’t qualify for relief.

Opportunities

Clients who’ve sold their business in the last three years could benefit from immediate relief from inheritance tax when they reinvest some or all the proceeds in a qualifying asset.

Solutions

BPR-qualifying investments

Wants to use a trust

Scenario

Clients who want to use trusts in their estate planning can be put off by the inheritance tax charges. A lifetime transfer of assets into a discretionary trust is a chargeable lifetime transfer. It can immediately trigger a charge of 20% on the amount settled above the client’s nil-rate band.

Opportunities

Clients who want to put assets into a trust could cut the entry charge by transferring an investment that qualifies for inheritance tax relief into that trust.

Solutions

BPR-qualifying investments

ISA investors

Scenario

Clients who’ve built up large ISA pots can be reluctant to sell down their ISA because they want to retain their lifetime ISA tax benefits. This can prevent them from using their ISA to plan for inheritance tax.

Opportunities

Clients can hold certain shares in an ISA that qualify for inheritance tax relief. A client could move some or all of their ISAs into a portfolio that can be left free from inheritance tax after two years.

Solutions

BPR-qualifying investments

Risks

Risks to keep in mind

Capital is at risk

The value of an investment, and any income from it, can fall as well as rise. Investors may not get back the full amount they invest.

Tax relief can’t be guaranteed

Tax treatment depends on individual circumstances and tax rules could change in the future. Tax relief depends on portfolio companies maintaining their qualifying status.

The investment may be volatile and difficult to sell

The shares of AIM-listed and unquoted companies could fall or rise in value more than other shares listed on the London Stock Exchange’s main market. They may also be harder to sell.

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Key documents

Key Documents

Octopus Inheritance Tax Service brochureDownload
Octopus AIM Inheritance Tax ISA brochureDownload
Octopus AIM Inheritance Tax Service brochureDownload
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