Joslin Rhodes

22:59, Fri 30th July 2010

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Case Study One

 

Background

Mr Owner aged 67 and Mrs Owner aged 65. Owner/Chairman of manufacturing business with two grown up children.

 

 

Challenges


Confusion

  • The clients didn’t fully understand pension and tax issues
  • Their affairs were somewhat disorganised.

 

Estate Planning

  • There was an Inheritance Tax liability of £640,000
  • An income of £30,000 (net of tax) was required to supplement drawings from the business

 

Retirement Planning

  • The clients were unclear as to how much they would need to fund their retirement.
  • Mrs Owner wanted clarity as to how much they could spend sensibly each year.

 

What we did

  • Simplified and consolidated investments and developed a bespoke investment strategy (within risk tolerances) and developed a cashflow analysis;
  • Calculated the lump sum capital required to fund retirement lifestyle
  • How much could be gifted to reduce the Inheritance Tax liability
  • Re-drafted Wills using special trusts to save £150,000 of Inheritance Tax immediately
  • In conjunction with a gifting strategy eliminating the remaining £490,000 of Inheritance Tax
  • Began discussions with the management of the business regarding a vendor financed Management Buyout.

 


The Results

  • Eliminated £640,000 of IHT and created an income stream of £30,000 pa (paying no tax whatsoever)
  • In conjunction with business drawings created a total income of £100,000 pa (tax efficiently)
  • Simplified the management and reporting of the investments (so it was understandable)
  • Reduced the portfolio risk and return characteristics (to improve performance)