Case Studies

A family held significant invested assets across several stockbrokers and investment managers. But they were becoming increasingly confused by “what it all means”, a lack of correlation between the change in value of their investments and stock market performance, and the jumble of valuations, performance reports and tax certificates, with no one organisation taking the lead in terms of co-ordinated planning. By considering their objectives across the whole family, we helped them:

• Implement lifetime gifting so that funds moved from those that didn’t need them (and never would) to those that did, with a consequential reduction in income tax burden and eventual IHT savings.
• Identify that the after charges performance they had been achieving was significantly less than could be achieved from investing in low cost index tracking funds.
• Simplify their investments so they had one source of valuation and tax certificate which easily feeds into their financial plan and tax administration.
• Reduce investment management charges by over £50k pa so that they get to keep more of their investment returns.
• Realign their investment mix in line with their objectives and timescale for spending the funds so that they benefit from long term growth.
• The end result was that our clients share less of their assets with fund managers and HMRC and can enjoy life without being bombarded with paperwork. Their children also benefit from having money now rather than when their parents die.

Our clients generate income via their own limited company and had built up substantial cash in their zero interest company bank account. They were becoming frustrated with their bank having the benefit of their hard earned money but paying nothing in return. What should they do with this money? Take it out? Invest it in the company? How would that affect the tax position on eventual wind up of the company? We helped our clients:

• Articulate their personal objectives and hence make good decisions.
• Implement a combination of profit extraction via pension contributions and dividends.
• Invest within their company, fully understanding the potential risks to Business Asset Disposal Relief.
• This meant that our clients eliminated the anxiety and annoyance associated with “idle cash” and got their company funds working more productively for them, as well as articulating their future personal objectives.

A Trustee was introduced to us by their solicitor because more than two years after the death of a family member, several hundred thousands of pounds of trust assets were sitting unproductively in the Solicitors’ client account and elsewhere in a life assurance Bond with an insurance company that seemed unwilling to communicate. A situation which no one felt comfortable with. Our clients had been tasked with the responsibility of managing a Life Interest Trust but had no experience in this role and little visibility on both their own financial requirements and those of the other beneficiaries of the trust. Besides, they were at a loss as to how the Life Assurance Bond fitted in (or what one even was). We worked with our clients and their solicitor to:

• Get the cash into an interest paying Trust account so that inroads could be made into the cost of professional fees.
• Gain clarity on the financial position of the relative parties to the Trust so that good decisions could be made on who should benefit, and when.
• Come to an agreement to use a power of appointment to advance funds to the appropriate beneficiaries.
• Understand the tax consequences of transferring beneficial ownership of and then liquidating the Life Insurance Bond hence minimising tax liabilities and eliminating complexity.
• This meant that the Trust could be bought to an end the funds put in the hands of the people who need them.

Professional Trustees or lay Trustees may have little or no context on the needs of discretionary beneficiaries and hence struggle to make decisions about exercising their discretion. So, they are operating in a vacuum. We engage with potential beneficiaries to understand their financial situation and hence enable Trustees to make good decisions to help beneficiaries and avoid potential future issues with disappointed beneficiaries.

Often troublesome due to conflicting interests of life tenant and remaindermen, with costs potentially eating up income. We have engaged with Trustees and life tenants (often same people) and implemented various solutions:

• Advising on exercising a power to appoint capital where we can demonstrate by cashflow analysis that the life tenant doesn’t need income (and they don’t want it either, preferring to benefit the remaindermen).
• Undertaking capital gains tax calculations for the trust and helping the life tenant plan around the potential inheritance tax implications of making a PET/absolute appointment.
• Winding up a “nuisance” life interest trust (i.e. small and costly) using actuarial apportionment between life tenants and remaindermen.

We come across situations where there is a large cash balance on the solicitor’s client account often due to reasons mentioned in the above two scenarios. This is normally an undesirable situation for all parties. We have advised Trustees on getting funds out of client accounts and either held elsewhere in interest paying accounts with a bank that will support trustee accounts, or filling the information vacuum described above so that immediate appointments to beneficiaries can be made or funds invested appropriately for the long term.

We often find that Trusts can be effectively wound up by absolute appointment to beneficiaries (often minors with adult bare trustees), especially when the underlying asset is a life assurance bond. This will involve tax calculations (which in turn involves understanding the beneficiaries’ tax position) and navigating the insurance company or investment house. These are all well-trodden paths for us, and we have a tried and tested approach for cutting through the barriers that insurance companies can sometimes put up.