IHT Case Study

Robert, a retired businessman, recently had a medical issue which resulted in a change of priorities from Wealth Accumulation to Wealth Preservation. Given the family estate was in excess of £1 million, Inheritance Tax (IHT) Planning also became more important and advice was needed in this regard.

case study image

Stage 1: Discovery Meeting

We agreed that a greater emphasis on Inheritance Tax Planning was now due, having identified an IHT tax liability of over £300,000 on the current estate and value of investments. A meeting with both Robert and his wife, Pam, also covered off their own personal views in regard to how they wished to structure their estate after their demise as well as the generic aspects of IHT and the types of arrangements that could be considered.

We established that both clients would very much like to ensure as much of their estate passed onto the children without however compromising their own situation with regard to access to income to meet any potential care costs in the future. In essence the clients wanted to keep control of the assets and access the investment whilst making them more IHT efficient if possible.

Stage 2: Research and Reporting

After our initial briefing our research and analysis concluded a number of options to assist the clients in their objectives. In particular, working with one of our existing investment providers at Talbot & Muir (Specialist Pension Administrators) identified a way of re-structuring Robert’s existing Self-Invested Pension by establishing a ‘Bypass Trust’, which allows the fund to pass into an IHT-effective wrapper upon Robert’s death whilst allowing his wife to receive income or capital during her lifetime. We also identified parts of Robert’s and Pam’s existing portfolio, including their ISA accounts and some Investment Bonds, along with a reduction in their Building Society accounts, as areas which were all contributing towards the Inheritance Tax problem as the values formed part of their estate.

Stage 3: Recommendations and Planning

After looking at a variety of options, including issuing a general document to assist the clients in understanding the options that existed, including providing our own guide to IHT, we concluded that a restructure of their current pension and investment strategy would be the best way forward. We arranged for full encashment of certain investments after, of course, checking the tax position and any charges that would be levied with reinvestment into a Business Property Relief portfolio, which provide both access to capital and income but also Inheritance Tax exemption after two years. This will result in an overall IHT saving of approximately £250,000 together with full access to capital.

Stage 4: Implementation

Due to Robert’s planned holiday, all investments were liquidated and a BACS transfer set up to allow for proceeds to be mandated from their bank accounts within 7 days of our initial meeting and agreement to proceed. All paperwork was emailed and arrangements were made to assist in setting up the new strategy prior to their departure for holidays, allowing peace of mind and ease of application in preparation for a well-deserved break.

Stage 5: Maintain and Review

All investments are loaded onto to our Client Relationship Software and a reporting date is agreed to ensure monitoring and performance reviews, as well as to ensure that all income payment dates are met and regular reviews are maintained.

Robert says:

We were delighted with the approach and advice Cockburn Lucas took in dealing with this complicated subject and how we were able to meet our objectives of passing on our wealth with minimal Inheritance Tax, whilst enjoying the benefits of the income it generates.


I chose Cockburn Lucas because they are superior to other local IFAs in terms of their knowledge of the financial market, their appreciation of clients' needs and their friendly and efficient service.

- Mr K Shine, Private Client