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Inheritance Tax Solutions - 2-Year Exempt Plan with Capital Preservation Objective

2-Year Exempt Plan with Capital Preservation Objective

How can I protect my assets from IHT but still have access to all the capital and have an income in a low risk environment (without involving a Trust)?

Client Circumstances:

  • Mr Jones is single and has an estate (including house, investments and savings) of £1m
  • He is 88 years old and is thinking of ways in which he can minimise his Inheritance Tax bill
  • Mr Jones does not wish to lose access to or gift any capital.
  • Mr Jones wishes to continue to receive income from the investment.
  • If Mr Jones does nothing, his Inheritance Tax bill will be £200,000, equivalent to almost 25% of his assets
  • Mr Jones is content with his assets’ value and is not in need of high growth and does not wish to take much risk
  • Assume Mr Jones benefits from new additional Residential Nil Rate Band of £175,000 at death

Recommended Solutions:

  • Mr Jones to invest £300,000 into a specific Inheritance Tax Plan.

Benefits from advice given:

  • After holding the investment for two years, Mr Jones’ investment is removed from his taxable estate.
  • Mr Jones can continue to hold the investment himself for his lifetime.
  • As the Recommended Plan has built-in flexibility, should Mr Jones need to withdraw money before he dies, he can do so without affecting the Inheritance Tax relief he will receive on the remaining amount in the investment.
  • By removing the investment from Inheritance Tax Mr Jones has potentially eliminated a significant part of his Inheritance Tax bill (i.e. a saving of £120,000)
  • The plan aims to achieve a net return of 3.1% per annum which can be added as growth or taken as income

2-Year Exempt Lower Risk Plan:


Assumes the investment is held for a period of at least two years and still held at time of death.
This table is for illustrative purposes only and does not constitute advice.

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Future Servicing

We will look to carry out a regular review of your circumstances, objectives, needs and portfolio performance to ensure all arrangements continue to be suitable and advise of any changes that may be appropriate.

This example is for illustrative purposes only, based on current legislation and tax allowances. Tax rules and regulations are subject to change.

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