Every successful business owner will have to make decisions about what to do with the wealth they have created. A significant amount of effort will often go into inheritance tax planning. True life-long financial planning recognises that whilst this is important, tax efficiency is rarely enough to ensure a pathway through inheritance that makes sense for all parties.
This story of one Clarion client, who has been a friend and client of our Chairman, Keith Thompson for almost 40 years, highlights the difference taking a holistic approach can make.
Andrew and his father started as partners in the mid 1970s building a successful engineering business, moving smoothly into the motor trade before going their separate ways. Andrew successfully developed several other businesses, until his wife, Gill, was diagnosed with a debilitating progressive condition and he sold his business in order to focus on supporting her.
Meanwhile, Andrew’s father, having followed Keith Thompson’s retirement planning advice for a number of years, was able to partially retire on an excellent pension. He still owned the motor business which was building up large cash sums because the money wasn’t needed. Keith helped to structure and provide advice for product-based inheritance tax mitigation schemes which enabled him to retain control of the funds until his death.
In 2016, when Andrew inherited, the mitigation schemes had been hugely effective, saving almost TWO MILLION POUNDS in Inheritance Tax.
However, Andrew was already 69 years old and his main priority was to spend more time with his wife before her illness became more severe. He didn’t want the complexity of managing investments spread over 20 different financial products or deciding what to do with two inherited businesses. He was also dealing with the frustration that the money would have been significantly more useful if he could have accessed some of it whilst his father was still alive rather than receiving such large sums on his death.
Luckily, Keith, who had supervised the effective product-based tax and retirement planning, recognised that a more holistic approach was needed. He wanted to make sure that the inheritance helped Andrew support his wife rather than becoming a significant cause of stress and so he introduced Andrew to Adam Wareing, Financial Planner at Clarion Wealth.
Using our tried and tested true life-long financial planning process, with Keith’s support, Adam got to know the family and really understand their needs, concerns and ambitions. Then he came up with a plan that has one key theme – SIMPLICITY.
The number of financial products has been being reduced by more than half; a Deed of Variation to Andrew’s Father’s Will has put the inherited assets in trust to avoid future inheritance issues and all the new investments are designed to fit Andrew and Gill’s risk appetites. Working with other legal and finance professionals, Clarion have been able to support the family in organising all the necessary products and contracts.
At the same time, Clarion have been supporting Andrew to make sure his son Ben feels fully involved in the next stages of planning. Ben is welcome at meetings and discussing the most important ways to support him financially both now, and in the future, is a crucial part of the process.
Now that the inheritance is in a manageable form, with investments with the right risk profile and flexibility, the team at Clarion are able to show Andrew and Gill clearly just how much wealth they have available. They are learning to change their cautious attitudes to spending, and make the most of the money they’ve inherited, ensuring that they use it to make their lives, and their son’s life, better whenever they need to.
Andrew’s story reminds us that planning for tax efficiency is only one part of successful inheritance planning. If you want to make the most of the wealth you are preparing to pass on, a true life-long financial planning approach will have a significant impact on the choices you make.
If you’d like more information about this article, or any other aspect of our true lifelong financial planning, we’d be happy to hear from you. Please call +44 (0)1625 466 360 or email firstname.lastname@example.org.