Protecting the Estates of your High Net-Worth Clients

Generally, relatively few high net-worth clients receive adequate advice on the protection and inter-generational tax planning of their estates, be it pensions, Death in Service (DIS) benefits, life cover, property assets, savings and investments or lifetime inter-generational transfers, it is up to you to rectify this with your own clients and make sure they are as prepared and informed as possible.

Integrated financial planning and effective legal planning are essential in delivering guaranteed outcomes for the distribution and protection of your clients' estates. If they do not have a Will, they may be unaware of the complexities and misdirection of wealth that can occur under intestacy rules. If your clients, like so many couples, have simple wills directing their estate to each other and then to their chosen Beneficiaries in equal shares, they should achieve their desired distribution, but they may be missing an opportunity to protect the surviving partner’s interests. Importantly, they also may be missing key tax planning opportunities which are overlooked in most higher value estates, and they will not provide inter-generational benefits to their chosen Beneficiaries.

The unpredictability of life requires us to be prepared but you ought to take action now to address the shortfalls of the most common estate planning arrangements of your clients, particularly the taxation considerations which require bespoke planning. On the death of the first of your clients, protective and tax efficient planning can be put in place and similarly protection, flexibility and inter-generational tax planning can be delivered to the ultimate Beneficiaries of their estate when both of your clients have deceased.

Such planning can be achieved by upgrading their current planning to a Solidus Plan or a Beneficiary Protection Plan from Solidus.

A customised plan for your clients may address any number of concerns such as;

  • Risk to their wealth following the death of the first partner e.g. remarriage.
  • Loss of tax allowances because their Wills may not maximise available tax allowances.
  • Redirection of the first to die’s estate if the surviving partner changes their Will.
  • Potential protection of the inheritance left to their chosen Beneficiaries if they were to divorce.
  • There may not be IHT payable when your clients die but it means their partner is highly likely to pay IHT because of their combined wealth.
  • Erosion of wealth when the inheritance left to their Beneficiaries is left to future generations e.g. their grandchildren.

If you look beyond the direction of their estate to their nominated Beneficiaries you will appreciate the many potential issues that exist and some of them are unique to high net-worth clients.

Many of the protection and tax issues can be effectively addressed with enhanced planning and advice using a Solidus Plan or Beneficiary Protection Plan from Solidus customised to your clients’ specific circumstances.

Questions and Answers

Are Beneficiary Protection Plan frameworks expensive to set up?

No, as a proportion of the value you protect it is typically much less than one percent of the estate value.

Are BPTs expensive to run?

No, apart from £10 nothing goes into them until your client dies, so until then there may only be an occasional cost e.g. changing a Trustee. You can charge an initial advice cost to the Trustees upon your clients death at your discretion.

Who should I advise my clients to nominate as Trustees?

You can encourage your clients to consider adult family members, or trusted friends as Trustees. It would need to be someone they can trust to have the best interest of their Beneficiaries.

What happens if my client wants to change the distribution of their estate?

It is usually possible to make most changes by means of a new instruction to the Trustees (Letter of Wishes).

How long does a BPT last for?

125 years in England and Wales and 80 years in Northern Ireland. Most families use them for at least one further generation.

Are BPTs taxed?

Under current rules there is no tax going into the Trust after any IHT has been paid. A Trust is like a person and has its own tax allowances for Income Tax, Capital Gains Tax and Inheritance Tax.

Can all of my clients' property and investments be directed into a BPP when they die?

The majority of personally owned assets can go into a BPP apart from specific assets like ISAs which may be transferred to a spouse or cashed in.

Can a BPP be contested?

Trusts can face claims from third parties but without an BPP there is no protection.

Our solutions

Single people

Single persons, whether widowed, divorced or simply single, require specific advice customised to their needs.

Married couples

Protective benefits for married couples is particularly important and is a focus of our customised solutions.

Blended families

The control and distribution of assets within blended families can be complex, our solutions ensure the desired wealth transfers are guaranteed.

Co-habitating

Co-habitees frequently have inefficient tax and protective arrangements for their estates, which can easily be avoided with bespoke planing.

£2m+ estates

Estates where Inheritance Tax is a potential issue can take legitimate actions to mitigate IHT. The majority of estates of £2 million+ have inefficient estate planning arrangements.

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