Transcript

Webinar Summary (Client-friendly summary generated from Otter and lightly edited):

Client‑Friendly Summary: “Passing Wealth On in 2026”

This webinar, presented by Martin Stanley and Scott Gallacher of Rowley Turton, explained how to pass wealth on to family in a way that is sensible, flexible, and fair—with inheritance tax (IHT) as an important consideration, but not the only driver.

1. Core Message

• Good planning is not just about saving tax; it’s about:
  • Ensuring you have enough for your own lifetime
  • Helping your family at the right time and in the right way
  • Avoiding rigidity, surprises, and family conflict
• Before gifting or doing IHT planning, you must answer:
  • “Do we genuinely have more than we’re ever likely to need?”
    Only if the answer is “yes” should substantial gifting be considered.

2. Why 2026–2027 Matters

• Currently, pensions are extremely powerful for IHT planning, but:
  • From April 2027, pensions become fully within IHT.
  • This is a major change and affects many people who have relied on pensions as an IHT‑efficient asset.
• In simple terms (for a married couple with children):
  • Up to £1 million can usually be passed IHT‑free.
  • Above that, assets are normally taxed at 40%.
• With pensions coming into IHT, more families will face or increase their IHT bill.

3. Two Example Couples – Same Numbers, Different Realities

Martin and Scott illustrated why “my friend did X, so I should too” is dangerous.

Both couples:

• Are 70, married, with two children
• Home worth £750,000
• Pensions, ISAs and savings: £1.25 million
• Total estate: £2 million
• Estimated IHT liability: £400,000

Couple 1 – “More Than Enough”

• Spending: £40,000/year
• Income (state pension + some pension + interest) is higher than spending
• Their capital is projected to grow over time.
• Conclusion:
  • They have more than enough.
  • They can likely:
    • Spend more on themselves, and
    • Consider gifting sooner and/or other IHT strategies.
  • Age 70 is often a good time to start serious planning and gifting if numbers support it.

Couple 2 – “Not Enough”

• Spending: £100,000/year
• Income is much lower than spending; they are drawing heavily on capital.
• On realistic assumptions, they may run out of money around age 85 (or even earlier if they gift too much).
• Conclusion:
  • They do not have enough to copy Couple 1’s strategy.
  • Large gifts could seriously jeopardise their own long‑term security.
  • They may still have an IHT problem, but personal financial security must come first.

Key lesson: Two families can look identical on paper (same estate, same IHT bill) but require completely different advice once spending and lifestyle are factored in.

4. Stress Testing – Planning for “What If?”

The advisers emphasised stress testing as essential:

They test what happens if:

• Investment returns are lower
• Markets fall or stay low
• Interest rates change
• Inflation rises
• Tax rules change (as they are with pensions)
• You spend more or gift more
• One partner needs long‑term care
• One partner dies earlier than expected

The goal is to give you confidence that:

• You won’t run out of money, and
• Your plans still work even when life doesn’t go to plan.

This is not a one‑off exercise; it needs to be reviewed regularly as life and legislation change.

5. When Does Gifting Make Sense?

Gifting usually makes sense when:

1. You have a clear, robust surplus, even on conservative assumptions.
2. You’ve stress tested your finances for bad‑case scenarios.
3. You have a strong wish to help family, often:
   • During their working lives, e.g. house deposit, mortgage help, school fees.
4. Your children are financially responsible enough to handle the gift.
5. You’re genuinely concerned about IHT and prefer wealth to go to family rather than HMRC.

But gifting can cause problems if it:

• Reduces your flexibility (e.g. you later want to move or need more income)
• Leaves you exposed to care costs or other big life changes
• Changes family dynamics (perceived unfairness, resentment, or disputes)
• Is effectively irreversible (most gifts cannot be “taken back”)

6. Fairness vs Equality (Equity)

The webinar distinguished:

• Equality – everyone gets the same amount.
• Equity – everyone gets what they need to achieve a similar outcome.

Example:

• One child is financially secure; another struggles or is vulnerable.
• Treating them “equally” in pounds may not treat them fairly in effect.
• Equitable planning might mean:
  • Giving more to the child who needs more help
  • Using trusts to protect a vulnerable child
    …but this must be carefully explained (where appropriate) to reduce resentment and misunderstanding.

Families can have very different views:

• Parents may favour equity.
• Some children may accept this; others may feel they are being penalised for being successful.
• Open communication, where possible, helps avoid fallouts and legal disputes later.

7. Common Pitfalls and Family Risks

The speakers highlighted that even well‑intentioned plans can go wrong if they:

• Are based on assumptions rather than clear structures
• Fail to consider vulnerability, divorce, or benefits
• Don’t reflect actual family circumstances (e.g. cohabiting, social housing, health issues)
• Lead to challenges to the will and potential court cases
  (e.g. claims under the Inheritance (Provision for Family and Dependants) Act 1975)

They also warned of the informal “50% divorce tax”:

• If you gift your child £100,000, and they later divorce, it’s quite possible £50,000 goes to the ex‑spouse.
• This can feel worse than a 40% IHT bill.

8. Tools for Gifting and IHT Planning (Without Losing All Control)

They discussed several approaches:

Simple / Direct Gifting

• Annual £3,000 exemption (and carry‑forward from one year)
• £250 small gifts to multiple people
• Marriage gifts (subject to limits)
• Regular gifts out of surplus income – particularly powerful and fully exempt if structured correctly.

Advantage:

• Simple and cost‑effective if you have surplus.

Risk:

• Once given, it’s no longer yours (and vulnerable to divorce, creditors, etc.).

Trusts

• Can reduce IHT if structured correctly.
• Allow you to:
  • Protect vulnerable beneficiaries
  • Maintain a degree of control
  • Manage timing and conditions of distributions
• Useful to skip generations (e.g. gifts straight to grandchildren) for long‑term planning.

Perception:

• Often seen as complex or expensive, but needn’t be if done appropriately.
• Beneficiaries should ideally have the purpose explained; otherwise, when they later become trustees, they may dismantle a perfectly good structure out of misunderstanding.

Life Assurance

• For people who can’t afford to gift much but have an IHT problem:
  • Use a life insurance policy in trust to cover some/all of the IHT bill.
  • Especially relevant where, like Couple 2, large gifts would risk their own security.

9. Pensions, ISAs and Trusts – Post‑Change Landscape

Pensions (now to April 2027)

• Tax‑relieved contributions, tax‑deferred growth.
• Historically outside IHT, making them ideal for estate planning.
• From April 2027, pensions are within IHT, changing planning priorities.

ISAs

• No tax relief on contributions, but tax‑free growth and withdrawals.
• Generally within IHT, apart from some specialist variants.
• Still very valuable for ongoing tax efficiency, but not in themselves an IHT solution.

Trusts

• A flexible tool for:
  • IHT planning
  • Protecting beneficiaries
  • Controlling timing and amount of benefit
• Must be carefully set up and maintained, but can be extremely effective.

They also noted parent/grandparent planning for children:

• Pensions for children/grandchildren – long‑term, locked until later life; powerful but not immediately helpful.
• (Junior) ISAs – accessible earlier; feels like real, tangible help.
• Trusts – to protect assets and manage them over time.

10. Property Questions (Home and Overseas Property)

Gifting the main home

• Simply signing the home over to children while continuing to live there rent‑free usually does not work for IHT.
  • HMRC treats this as a “gift with reservation of benefit”, so it stays inside your estate.
• One technical option:
  • Gift the home and pay full market rent to your children as landlords.
  • This can work for IHT, but:
    • Rent can be high and often feels unpalatable.
    • There are complexities and family risks.
• Gifting to trust faces similar “reservation of benefit” issues if you still live there.
• Downsizing and then gifting some of the released capital is often more practical.

Child living at home

• If an adult child genuinely lives with you and pays their share:
  • It may be possible to gift them part of the house in a way that avoids a “gift with reservation” (subject to conditions and advice).
  • But this raises fairness and will‑planning issues with other children and needs very careful planning.

Overseas property (e.g. Spanish property)

• For most UK‑domiciled people, UK IHT applies to worldwide assets, including property abroad.
• Simply moving money into a foreign property does not generally escape UK IHT.

11. Practical Takeaways

1. Start with “Have we got enough?”
   Do not begin with “How do we reduce tax?” Start with your own long‑term security.
2. Use proper financial planning and stress testing.
   This shows what you can safely afford to gift, and when.
3. Think about family dynamics, not just numbers.
   Consider equity vs equality, vulnerability, divorce, and benefits issues.
4. Aim for flexibility, not rigidity.
   Gifting strategies that can be paused or adjusted (e.g. regular gifts, staged gifting, some trust structures) are often safer.
5. Communicate where possible.
   Open conversations with family can significantly reduce the risk of disputes and legal challenges later.
6. Review regularly.
   Health, markets, tax rules, and family circumstances all change. Planning should be an ongoing process, not a one‑off event.
7. Consider professional help.
   Martin and Scott invited attendees to contact them for:
   • Personalised planning and stress testing
   • Discussion of gifting, trusts, life cover and the 2027 pension changes
   • A copy of the “Enough” book and a PDF on key IHT planning measures.

In short:
Good inheritance planning balances three things – not running out of money, living well now, and helping your family – with clarity, flexibility, and as little family conflict as possible. Tax efficiency matters, but your security and family harmony matter more.

Transcipt

SUMMARY KEYWORDS

Inheritance tax, financial planning, gifting strategies, stress testing, family dynamics, pension changes, trusts, estate planning, tax efficiency, financial security, inheritance tax liability, regular gifts, life assurance, property gifting, equal vs. equitable distribution.

SPEAKERS

Martin Stanley, Scott Gallacher

Martin Stanley  

Good morning everybody, and thank you for tuning in to this latest webinar from roadie certain. Today’s subject is passing wealth on in 2026 I don’t mean passing it on now, but planning to pass it on in the future. So before we start, it’s a couple of slides just to say that your microphones are muted and your camera’s off, so you can relax and just watch and listen. There’s a Q and A feature at the bottom of your screen on Zoom, and we invite any questions, which we’ll take at the end of this webinar a caveat. We always have to say that nothing today is actually advice, although, of course, we would love you to get in touch where we can advise you and look into your own circumstance in more detail. So to introduce ourselves, my name is Martin Stanley. This is Scott Gallacher. We’re chartered financial planners at Rowley certain and we help people like you, families, individuals, trusts and small businesses. And today we’re talking about how you can help your family, not necessarily just save tax. And the subject, of course, is inheritance tax. So let’s plow in key points about inheritance tax. When people start and think about inheritance tax, they normally come to think about either saving tax or helping families. We’re going to talk about what helping family can really mean. It’s not necessarily simply giving money. Why tax led planning might go wrong. We’re going to emphasize too that you should start with thinking about yourself rather than other people looking at the risks of taking precipitate action and gifting too much too soon, some of the family issues that can come up, and we’re going to look quickly at some tools that can be used touch on that lightly, and at the end, we’ll take your questions. So to expect from today, this is purely education. There’s no product push, although we’d love you to come and speak to us, there’s no product push, no obligation. This is purely for your information. And welcome to everybody. So people come and sit in our boardroom where we are now, and there are two key phrases that come up at is, I would like to reduce tax, or I’d like to help my family. Those two things can mean different things to different peoples, and they’re both very reasonable objectives, but they don’t always lead to the same decisions. So let’s have a look what we think helping family really means is more best practice. We think is avoiding surprises, certainly unwelcome surprises. We think avoiding rigidity is important unless it’s necessary, which it sometimes can be. But keeping flexibility is a really a good aim. Avoiding future conflict is really important. Now I’m afraid that conflict in families is a very real thing, even if families at least expect it, and good planning means you can minimize the chance of that. Good planning, good helping family, often means supporting their independence, not then being dependent on you. Some people, unfortunately, are sort of waiting for mum and dad to die. It’s a horrible thing to say, but we’d rather that they were helped to be independent of that situation. And lastly, it’s all about helping out the right time, not necessarily just at death. And to do that, you’d have a confidence of what you’re doing, and that confidence is one of the things we’re going to talk about at the bottom that tagline on your screen says clarity and confidence, not simply tax efficiency, are some of the key things. So reason planning sometimes can go wrong or not be as successful as it might be is because it narrows things down and boils it down to certain Stark questions, how big will the bill be? How do we reduce it? What can we give away now? So instead, we’d encourage people to ask the fundamental first question that leads all of this, which is, do we genuinely have enough to have we more than we’re ever likely to need? If the answer is yes, then maybe we can go forward. So to give a concrete example of that, I’m going to hand over to my colleague Scott. Now he’s going to take us through example of two families, apparently similar, but as we might see as we go through, they’re not necessarily the same.

 

Scott Gallacher  

Thank you very much, Martin. Anyone that works with myself and Martin will know that we’re very keen on financial planning. It’s kind of core what we do with everything, but in terms of gifting and inheritance tax planning, it’s even more crucial. We think so. What we’ve done is created two almost identical couples. Is people that sit in the pub and chat amongst each other selves, and might think that they’re exactly the same, and therefore may think that the solution that they need is exactly the same. We get this occasion that people go, Oh, I’ve done this because my mate, Bob did it, and we’re the same. And actually, when you drill down that, you know, Fred isn’t the same as Bob. So we created two identical couples, both age 70, husband and wife, and both couples, you know, both with two children in their 40s. They home worth 750,000 then pensions, ISIS and savings, giving a total estate of two. Million pounds. That’s 1.2 5 million of pensions, ISIS and savings and the house of 750,000 So in simple terms, you in the inheritance tax married couple with children leaving everything to the kids. Can, in simple terms, leave up to a million pound tax free. So these have got estate of 2 million pounds. Technically, some of this money is in pension, which today is inheritance tax free. But one of the concerns in 2026 it’s the last year that pension, last full year that pensions are completely exempt from inheritance tax, from April 2027 pensions becomes of its inheritance tax. And that’s changing the situation for almost everybody we’re speaking to. And that’s quite a big change. So it used to be that pensions were great go to inheritance tax paying tool. They still have a key part in planning, but they do not, or will not serve that same IHT saving strategy from April next year. So this is why we’re encouraging people talk about it now, because it’s going to change the situation. Separately, there’s a calculation on our website we can share with you which which illustrates this issue. So we’ll assume for this case, that the change of the IHT rules has already gone through. So they say it’s 2 million pounds. We’re assuming that pension is now subject to inheritance tax. There’s no change in value, and that means that both couples have the same 400,000 pound inheritance tax liability. So they might think they’re saying, in terms of income, they’re both at state pension age, so 12,000 pounds for husband and wife. So 24,000 pound for a couple. But as you’ll see on the little table on the right hand side, their spending is completely different. So couple one are perhaps a typical Well, it’s quite frugal. Don’t spend enough money. I spend a lot of my time nagging. People spend more money. They’re only spending 40,000 pound a year. Couple two are spending 100,000 pound a year. So in terms of the draw for savings and investments and pensions, that’s a lot more. So we’ll just have a look at how it looks in practice, and how their financial situation may be completely different. So if we start with couple, one, as I just repeat that thing about same, 400,000 pound IHC liability. So why don’t start gifting and taking IHC patient planning measures today, and it’s and that’s the conversation you might have in the pool when I’ve got a house like this, I’ve got a pension like this, this is my situation. This is my tax bill. Both are the same. I should do what you’re doing. I should be giving money away, not necessarily, because they are very different, as I’ll show in a moment. So couple one, you know, all the details I mentioned before, what we’ve put is assume that both couples show 20,000 pound the year gross from their pension. So they have got some income which is obviously taxable, but it goes towards their spending. Now if we look at couple one, this is one if you work really, certainly have seen this chart before. The blue lines is income or money coming in to your pot, as it were, and the red line is your expenditure or tax. So in this case, couple, one have more money coming in, and that is state pension. That is the private pension income we’ve assumed draw down and some interest from the savings. We’ve ignored the ice of income and growth because that’s kind of separate and doesn’t necessarily it isn’t being withdrawn in this case. But even ignoring that for a moment, they’ve got more money coming in every month. So these are the typical ready turn climb. They’re actually saving money as we go along. And so if we look at their capital chart, which ignores the house and the pension, so this is your savings and investments. And again, if you work with me or Martin, you’ve seen this chart before, hopefully yours goes up or certainly doesn’t run out. And so this couple a combination of a bit more coming in than going out every year, and the ice is still growing because we’re not touching them their capital, and this is all in. Today’s money just goes up and up and up. So, as we would say, more than enough. So I’ve referenced the book. We have the book enough for these clients. We would turn more than off. So they are definitely should be considering when I would say, first spending more, but then separately, you know, more, inheritance tax planning, things to consider. They don’t have to do it. Some people don’t want to do it. But if you’re here today, I’m guessing you’re interested in that, and you’re wanting to help the children. So we would encourage doing more sooner, certainly at 70, because we’ve got a bit more certainty about the future at 70, as opposed to say, 60 or 50. But it’s certainly they’re ripe for that kind of conversation, and at least to start looking at the process. So we jump back to couple two well, they now spend 100,000 pound a year net. So they’ve got a very good lifestyle, which is fine. And on one hand, you think, Well, hang on, we’ve got 1.2 5 million behind us, Scott, and we’ve got the 24,000 pound a year from a state pension. We must be fine, you know, but we accept that we’ve got this difference. So again, spending the income is about 50 odd 1000 pound a year, so state pension, pension withdrawals and some interest on savings and okay, but they’re spending 100,000 so this is the red line. Is much higher than the blue line, but they do have all that capital behind them, and it’s not an unreasonable position. Suspend your capital and retirement. We encourage clients to do that. The key thing is that we just can’t run out of either income or capital. So that’s just our Quick Look how that looks like. Ah, not so good. Now you might argue, on the assumptions, these are reasonably, I would say, realistic, not overly conservative assumptions, but on those assumptions, we’re predicting that the client might run out of money at around a. Age 85 and at that point, most they still have a bit of pension income from the drawdown, but their financial spending would have to drop dramatically. Now, to be fair, they might say, Well, I’m 85 I’m going to spend less. And normally we would plan that in in this case, we assume a simplistic 100,000 for out. But again, if we’re giving money away earlier, well we’re not even going to get to 85 and that’s before we’ve done some stress testing that Martin will mention later about different investment returns, different tax rates, different inflation figures, spending more and or gifting, as we’re talking now. So we would say that they don’t have enough. So yeah, reference the book quickly. Yeah, do you have enough? No, they do not. So if they’re sat in the pub with the same 400,000 pound rht problem and couple one has said, Oh, I’ve been to see Scott. And he says, We should give 200,000 pound away just to get the ball moving, help the kids, perhaps buy house, or whatever it may be, or pay off the mortgage. And then couple two goes, Ah, that’s great advice, not advice. I haven’t spoken to them. I will go and do the same. Well, no, they are going to find themselves running out money maybe age 18, and that’s a big problem. And even if they die before age 80, some people may say, is their plan. I don’t think that when you get to your mid 70s, which is in this case, five or six years time, and you start seeing that money run out, I don’t think that’s a good position to be in. So we would caveat to that. So the planning and do you have enough? Is the absolute starting point of any kind of gifting or inheritance tax planning conversation in my case. So I say, you know, the key question is, you know, you do have more than you’re likely to need, and have you stress tested it? I’ll pass on to Martin, who will talk about stress testing.

 

Martin Stanley 

Stress testing is one of those things that’s an absolutely crucial part of what we do. And if you’re a client of art already, you will have seen this. It’s all very well having a look at the nice, clean grass that we’ve just demonstrated and saying, Well, look, it runs out at this age, we’ve got enough money for that assuming certain things. But what are those assumptions? Because the future can throw up things in our path that we can’t foresee. Now, investments are a big part of a lot of people’s planning. Most of our pensions, apart from final salary, pensions, are dependent on stocks and shares to some, some degree. So what if markets fall or they stay low? What if interest rates decrease or increase? And what if inflation rises? What if tax rates rise? We’ve already seen that in 2026 the tax rates are effectively increasing. That is to say, the bands have been frozen, which means that as money gets higher and higher and higher, our tax rate is effectively more, even though the headline rate stays the same. So that’s something to consider. What if we spend more or give some away? How does that affect this graph? Let’s stress test that. Let’s see what the result is of doing that and something we don’t like to think about, what if long term care is needed, what if one of us dies? So all of these things are circumstances that life can throw in our path. Not a lot we can do about any of them. We would like you to be confident that if these things come up, that you’re secure, you’re robust. Nobody can cope with complete catastrophe, but we’d like you to know that, be confident that you can cope with whatever life throws up against you. And of course, a key part of this is keeping on track along the way. This isn’t a one stop assessment. This is something that’s looked at again and again as the years go by. So before concerning yourself about inheritance act, that’s the key question to answer. Have I done the planning? Have I got enough? And we can see that in Scott’s example, family one did, and family two, sadly, didn’t. And then secondly, have you not only thought about this, have you thought about it in depth, and have you done that stress testing in lots of different scenarios? And that’s what we help our clients do. So just going back to family, family one, wasn’t it? Well, yes, we think perhaps they could gift away a fairly significant amount now they got their isas, and what we see on screen is that the rest of the money, and there’s a large proportion of that, which could be given away, and the amount will depend on how comfortable those clients are and how deep they want their safety net to be. So just to sum that up, then, when does gifting and generosity make sense? It makes sense when you’ve got a clear surplus, even under conservative assumptions of stress testing, if they must be conservative, there’s no point in assuming, well, I hope I’m going to make 10% of percent a year on my pension. It needs to be sensible. You must have a strong desire to help the next generation. Now some people will think, Well, actually, that doesn’t matter. I’d rather leave it at the end of my lifetime. But the reality is that generosity during children’s working lives in their early years is often much more impactful and much more helpful than when you die at the end of your own lifetime. You’ve got to consider whether children are financially responsible. We all know that some people who given a large amount of money might not behave very responsibly. And of course, the last point is you’ve got to be concerned about inheritance tax if you’re here today. I guess it’s something that’s in your mind, and you would rather give more to your children than to the tax plan. So let’s move on from there. So there are some concerns where things can go a little bit wrong. I’m going to talk about that a little, and Scott’s going to talk about it in more detail, in a family sense, gifting can create problems when it reduces your own long term flexibility, and by that I mean changes in your own wishes, objectives and circumstances. Perhaps in the future, you might wish to move to the coast. You might want to start a new project. Sadly, there might be a marriage breakup. These are all things which have the opportunity or the potential, to take things off track. If you’ve locked yourself rigidly into a plan, you may regret that. And the second point reinforces that. It assumes that life will go to plan. I think we’d like for your plan to be flexible enough to cope with changing circumstances, limiting your ability to respond to health or care needs. We don’t like to think about it, but roughly about a quarter of people in their later years will need quite expensive health care. It’s something that people worry about a lot. It’s difficult for most people, unless they’re very, very wealthy, to plan completely for that. But it is something to think about when you’re considering, well, how generous can I be and how deep do I want my safety net, my comfort blanket, to be in my later years. How close to that line? Dare I go? Something to think about also is changing family dynamics in unexpected ways. Siblings and parents have a relationship which can be affected by money, often by feelings of unfairness or feelings of obligation. That’s something to be cautious about and really think about. And lastly, on this section, bear in mind that gifting almost always. There are some different circumstances mean that it can’t be undone. Once a gift is given, it’s it’s given and it’s gone, there are some trust arrangements which retain control, but fundamentally, making a decision now can be forever, and that’s normally why people leave inheritance tax planning to a certain point in their lives. It’s unusual in the 50s, more common in the 60s and in the 70s and later, it really is what becomes quite important. So fundamentally, these questions need to be taken into account in order that gifting should reduce anxiety and not create it. This is one last point which I’d like to share with you before I pass over to Scott for another section, which is the difference between fairness or equality and equity. This is a new slide that Scott introduced me to only today, and you can see that on the left hand side, every kid gets the same they all get one one box, one lump of wealth. And that seems fair, right? And that’s what an awful lot of parents think, well, everybody gets an equal amount. And some people are scrupulous in making sure that, you know, every child gets the same benefit from Mum and Dad. But in actual fact, the kid there who’s a little short fella can’t see over the fence, and the tall one didn’t actually need any help seeing over the fence. If we look on the right hand side, what we call the equity, the smaller fella gets more of the wealth. The medium sized fella gets part of the wealth. The guy who’s doing well in life, the one who’s already quite tall doesn’t need any extra help. And the result is they all get to see the what looks like a baseball game in the background, and they all get to participate in life equally, even though your contribution to that has been very different. That’s an uncomfortable thing for some people. It involves careful thought, but that difference between equality and the actual outcome is something really worth thinking about. So there is no right or wrong answer on that, but communication with the family is probably a key to this, to avoid current or future misunderstandings or disputes or perceived unfairness. Now, unfortunately, that is something we want to talk to you about, that perceived unfairness disputes, and Scott is going to talk to us about that a little bit now.

 

Scott Gallacher  

Thank you very much, Martin. Just touch on this and make the point that there can be lots of different views even in the same family on this point. So Mum and Dad may have a different view about whether they’re looking at equality. So we have three children, we split a wealth three ways, equally, whether we look at and the I said that made me want to Dad’s review. Maybe little Johnny needs more help, so we will give him more money. And equally, the three children may have different views. Now. It may be then, and I’ve certainly seen this in some families. Some families would say, well, actually, you know, I’m the tall person here. I’m doing really well. I don’t need it, but my sister needs more help. That’s quite fair, that Mum and Dad help her more than me. Other people may take the view that, hang on a second. We’ve all had the same life chances in life. I’ve got where I am because I’ve worked hard and pride myself. Why should I get less of my family’s inheritance because my sister hasn’t worked hard or taking that view, or equally, the other side of it is dealt with people, whereby mum and dad were saying, Oh, well. A son needs a bit more help, and sisters doing really well, and a has actually gone well. A we don’t know really how well the sisters do, and don’t really know what a financial situation is, and it’s a bit unfair to give me more. We should perhaps look at equality. So there isn’t a right answer whether you’re the parent or the child, but I think a conversation is most helpful the risks of not having that conversation now and just leaving it in your will and letting the chips fall as they do, is that then your children fall out. My general rule is that when somebody dies, everyone falls out, whether it’s over money or something else, that’s difficult to avoid, but I think we can minimize that risk by having honest conversations now, because situations are differently so again, so as a even well meaning plans, whether that’s where the early planning can leave family members treated unfairly, relies on assumptions rather than clear structures, because, again, people don’t know the situation, fails to consider vulnerability or long term consequences, and can lead to challenges to the world. As a case only the other day whereby somebody been left the house, and I think their siblings have been left 250 pound only instead of 600 house. Now, I think there was a lot of question mark over the will. But even if that will was entirely valid, and that was in question, the siblings that had been excluded still have a right to claim under the 1975 inheritance, something it’s called, but you still see, you can potentially end up in court case. In this case, the daughter that got left the house ended up with 400,000 pound legal bill. So again, you want to avoid that. And obviously most people would like their siblings to their children to still get on when they’re not here, and that’s less likely if there’s a dispute over the estate. And also, outcomes don’t always reflect the original intention. So just go back one second to this equality and equity thing. So as a case that I’ve dealt with, it wasn’t even a really an IHT plan, in case, it was just family planning, because there was no IHC concern. And their point was, well, hang on the the elder brother and sister, they’re fine. The youngest son is still at home. He’s vulnerable. He needs looking after. So what we’re doing, Scott is we’re just leaving the house, which on Facebook sounds certainly the equity point. Then when we started to drill into the family and the situation, it became found out that might be hugely problematic. Firstly, one of the boys, yes, he had a house, but that was he was in social housing, and the house was actually in his partner’s name, so really have nothing if they found out he would be homeless. The following day, the sister was cohabiting, not married. Husband had a boyfriend for correction, had most of the wealth the house was in joint names, but she didn’t have the same financial protections as she was married. So she was still a little bit vulnerable, not as vulnerable as the eldest son, but still a bit vulnerable now the youngest son, yes, he had issues, but the concern was, well, hang on, if we leave in the house, how does he pay the bills? Struggled. Working. Benefits aren’t great. Could he be taken advantage of could some girl take advantage of him? Could somebody move in? You read early think about cuckoo and gangs and stuff. So he’s very vulnerable. So whilst this was an inheritance tax planning situation, what we actually discussed with the family is actually using a trust, a discretionary Trust, which would allow the me to benefit the youngest son, but also protecting the two of the children. And that also may have advantages in terms of benefits and stuff, because also the other danger is money goes to the younger son, if that person on benefits and suddenly comes into a windfall by way of inheritance, it may mess up his benefit situation and effect your estate could effectively just go back to the government, by way of him losing his benefits. So then, even in that situation, he isn’t necessarily benefiting. So again, everyone’s situation is different. Almost everyone in the family will have a different view of what is fair. But it’s important that we understand what you’re trying to achieve and what the outcomes might be, you can never achieve 100% certainty, but with good planning, can minimize the risks by in terms of inheritance tax planning, without losing all control. So if you just give all the meat to the kids, effectively, you lose full control. So there’s nothing to stop people writing checks children. People think there’s a 3000 pound limit. That’s just an exempt gift amount. In most cases, you can give more than that, as long as you don’t as you don’t die in seven years with no HT problems. But of course, it’s only children’s money. One of the things I often quote to children is the risk of 50% divorce tax. What do I mean by that? There isn’t a divorce tax of 50% as such, to be clear. But what it means is, if you give your son 100,000 pounds and then he gets divorced, it is likely that the 50,000 pounds of that 100,000 I half will go to your now ex daughter in law. So that’s tends to sting a bit more, and that is, in a sense, more than the 40% IHT saving you may achieve some of the ways that you can do gifting and IHT planning without losing control, is regular gifts, especially out of normal income, which has a additional, IHT saving. And what that means is, because you’re doing a regular basis, you’re not necessarily committing to 20 or 30 years of gifting. If you did this for a year or two and your circumstances changed, you wanted to move to the coast, as Martin said, you needed that additional money. Fine. You can stop it. So it’s not as fine as big, if it’s not as effective, but it’s also not as. Final Phase gifting. So same principle, but we maybe do some this year, some next year, maybe some in five years time, but again, at each step, we can pause and reconsider your financial situation. It’s not as big as commitment. Trust, complicated. Can be expensive, but generally very good. There’s lots of controls for you and for the family, so you can keep control of money on space. Some trusts allow you to receive, effectively, an income from that trust, or to have the money back you lend it to it’s too complicated for here, but we can discuss it with you personally. And a simple one life assurance we’ve got. We go back to couple two say they’ve got this 400,000 pound inheritance tax bill. Can’t really afford to give any money away. They might be able to afford to set up a life insurance policy for 400,000 pounds under trusted the kids to pay the tax if they die in the short term, as they get older, we think their inheritance tax bill will drop off so they can possibly don’t need that policy forever. But again, that’s a lower cost, easier, less dangerous way of sorting the inheritance tax problem in their situation, assuming they’re in good health. And we mentioned on the intro that we would talk on pensions. Isas and trusts, they are even more in vogue or in the news at moment, because the IHT changes we mentioned earlier on pensions. So pensions in simple terms for you, you pay money in you get tax relief for growth actually, and up until April next year, they are inheritance tax free. So for the last 10 years, clients and ourselves have been using pensions as a huge inheritance tax planning vehicle, funding them and not drawing them, drawing other ways. And that all changes in April next year. So we need to be on the board and ahead of the game and considering what that means for your situation. Isas, pretty easy to stand on. Most people get isas, no tax refund contributions, limited to 20,000 pound a year to pay tax free growth. Tax returns, very flexible. Generally no. IHT benefits. There’s couple of ices that do. But the general exception, the standard Isa, if part of you say no, IHT savings, trust can reduce IHT structure properly can keep you control. So those family situations mentioned where you need to protect beneficiaries from themselves, or you just want to control the money you some of them are allowed to have income or capital back from home on certain circumstances and harder to reverse. Your circumstances change, but they do have a key part. All of these things are tools in a box that me and Martin will use separately.

 

Scott Gallacher  

Then there’s also pensions, isas and trusts from the Children’s perspective, so parents and grandchildren could pay into pensions for the children. There are some advantages of that, the still tax relief on the the beneficiary or the child or the grandchild’s tax rate, but they can be often misunderstood by beneficiaries, because what’s the pension? When do I get the money? Well, not to your 5557 in many cases now. So basically that they’re not accessible for many years. So it’s not necessarily immediate benefit. And I think that is a pro and a con. Some grandparents in particular, like to fund pensions for children because they know that they can’t touch you for 5060, years, and that’s a long term benefit for them, compounding growth. And also, long after we’re gone, the grandchildren will be benefiting from that money, and that can be earned, but in short term, children don’t, or grandchildren don’t benefit, and that can be negative. Isas a junior ISIS, much easier than sand, fully accessible. Well, age 18 for a junior, Isa, but normal ISIS, any age feels like real help from parents. And also if, even if your children are doing okay and are saving and investing people in HR not they don’t always have 20,000 pound a year to pay into the Isar. And there’s a lot of planning to say, well, actually, if mom and dad fund that for you, you’re filling up your ice allowances as we go along. So there can be huge tax savings down the line from that and trusts mentioned earlier about the vulnerable son, can protect beneficiaries, sometimes from themselves, allows you to have control, so that can be a good thing or a negative thing, depending on where you feel there’s a beneficiary, they tend to confuse beneficiaries often viewed as too complex or expensive. They don’t have to be and once we do, generally aren’t. But that’s the perception. They generally work best when the intentions and the benefits are clearly explained to the beneficiaries where appropriate. Sometimes it’s not appropriate to discuss it with the beneficiaries, but the risk is that you set up a trust for children. The children effectively become trustees when you die. It’s generally how it works, and then they don’t understand why it’s been done. They think it’s complicated and expensive, end up on winding it, and then five years later, they realize they’ve got their inheritance tax problems, and saying, what should do? And we’re kind of kicking ourselves on the table saying, Well, we did tell you five years ago we should have kept the trust. So there’s a kind of knee jerk reaction from children when they become control of these trusts, if they’ve not haphaly explained it. So it’s also worth you can use trust also to skip generations for future IHT planning, which is helpful. So what does good IHT planning, or estate planning look like in in practice? Well again, as we say, it starts with these conservative assumptions about whether you have enough builds in a margin for error, this stress testing me and Martin talked about. So basically, well, what if something changes? Interest rates in even the time I’ve been here has been as high as what, say, 6% as low as virtually zero. That’s a huge change. You need to consider whether that might happen again in next 30 years, except that there’s uncertainty. Nobody can certainly, the examples we showed were very simplistic. In reality, we model a lot more stuff for you behind the scenes, and we’re trying to build in that margin for error. The main thing is to not leave yourself short. Yes, we don’t want to pay inheritance tax on necessarily, but the starting point is make sure that you’re going to be okay. Last thing we want to see is you’re unable to fall out at the golf club membership and the children driving around in a brand new range. Overall. We’ve seen that before, but that’s generally when people haven’t done the planning properly, and certainly haven’t done it for ourselves, and it progresses over time, so it’s not necessarily bang done, if nothing else, the inheritance tax plans are frozen. Now you expect your house and other assets to increase in value. So even if you don’t have an rht problem today, you might have one in the future. I say it considers the entire family. What is fair? What do people expect? Do people need help. Some cases I mentioned earlier about skipping a generation. Some of my clients are in the middle saying, well, actually, I don’t need inheritance from mom and dad. We’re doing very well. Can we skip a generation? That’s actually sometimes hard for the our clients have a conversation with their parents about because they don’t quite get it in with we’re not directly involved, and we’ve certainly seen, you have to be cautious on this, we’ve certainly seen situations where clients have almost been disinherited, with with their parents have gone all right, well, if you don’t want more money, then I’ll leave it to the capstone. No, no, that’s not what we’re saying. What we’re saying from a tax angle, it might be better to skip it to the grandchildren, but these, these are the better conversations you can have with parents, children, etc. Works better as I reviewed, it’s not done once and forgotten about. It’s generally a journey, not a single decision. And as we say, on to Martin,

 

Martin Stanley  

yeah, thanks. So just coming into where we started, there are two key phrases we hear. Which are, I want to say tax, I want to help the family. And both are great aims, but as we’ve seen, both are subtly different. Both have slightly different priorities. We’ve also seen that different people who are apparently similar might, in actual fact, underneath, have very different requirements. So looking forward for both those people is crucial. So for both of the families we saw, planning and stress testing was really the key thing. So if you’re sitting there thinking, was it all very interesting? Very interesting Scott and Martin, but in a practical sense, where do I go from here? What I would say to you is this, start the planning. Start that stress testing. Start to understand what it looks like. Fundamentally, there are three things you might want to balance. Firstly, you want to not run out of money. Don’t want your own financial security to be jeopardized. But secondly, you also want to live well now. You don’t want to stint yourself while you’re alive. And thirdly, you want to help the family. Now those three legs of a three legged stool are not easy to balance. It’s not always intuitive, it’s not always obvious. That’s what we help clients do. So start that process now. And I beg of you don’t make the mistake that some people do, and it really is awful, which is to say, well, we don’t need to think about anything. The kids will sort it out after we’ve gone. It’s a big mistake, as we’ve seen, as Scott has explained very often, that sort of answer leads to disputes, unhappiness, ill will and sometimes even legal action. It’s awful, please, please don’t do that. Lastly, although this is uncomfortable, a lot of people I know consider that the best planning of this sort takes place openly. It’s not suddenly strong on people later. So if you possibly can involve the family. It doesn’t have to be in detail, but just in broad brush terms. Um, it’s not always appropriate to do so. Very often it’s much better for people to know what’s happening, to know what the future looks like, and for not being unpleasant surprises, and if there are any difficulties, they can be thrashed out and resolved before the time comes. So the best planning, then, to sum up is flexible, and it’s planned and it’s understood where appropriate. And that means that your children are likely to be truly more grateful, and you are like to be truly more confident that you are balancing those three family needs successfully. And we will help you do that. We’d love you to get in touch and ask us about this. Scott mentioned a little while ago that we had the nough book. This book is not written by us. My glamorous assistant here is demonstrating it. This explains, in a simple way, some of the key points about general financial planning, and how to how to consider your financial planning through your life. And if you’d like to email me your postal address, because it’s a paperback, I’ll pop a copy and a post to you and you can have a read. So that sums up everything today. I hope you’ve taken some good thoughts from that. Any questions at all? Please let us know, but some questions we have now, which we’ll look at together. So this person didn’t leave their name, but then asked a question about gifting the seven year inheritance act rule, if one person from a couple is not expected to survive for seven years due to medical condition, can the spouse make a gift instead, without running foul of a seven year tax issue. So normally, for inheritance tax, every person is considered individually as a principle of independent taxation in the UK. So if one person is sadly going to pass away within seven years, yes, the first person can the other person, the other partner or spouse can make the gift from themselves. However, it can be a little bit more complicated than that, because you must remember that, especially for married couples, the allowances are can be considered, for most purposes, to be joint, so that if somebody uses up past their allowance during their life by making gift and then dying within seven years, they have then less allowance pass on to the next person. Scott, did you want to comment on that?

 

Scott Gallacher  

Yeah, so, so in terms of specific question, is, with say, It’s Bob and Jane for ease. So Bob has some medical condition that, yeah, he’s not very healthy. So can Jane give money? Well, a couple of points on that is she can give her own money. No real issue without in the hope and expectation she lived so many years old. Caveat that people don’t always sounds awful. We don’t always die in the right order or the order that we expect. So no guarantee that works better. But obviously on logically respect to in a sense, there’s no issue with Bob giving money to Jane and for the senator into spouse exemption, provided they are married or in a civil partnership, and then she gives the money. I would go further than that. So if this was a client that we were talking about, and clearly we had an inheritance tax thing, and we address the enough point, which in this case will be not so much for Bob, necessarily, depending on the sales situation, but definitely want to ensure Jane is going to be okay. And that’s generally most people’s starting point from this, we would start saying, Well, hang on, what other things can we do in addition to this? Firstly, we have the I mentioned earlier, this 3000 pound gifting. So this is an exempt amount you can gift away in each tax year. And if you didn’t do that tax year, you can bet we do six. You can catch up a year. And so that’s the thing you can do. Regardless of health, you also have a separate 250 pound exempt gift that can’t be to the same person that gave the 3000 pound. But if we’ve got, say, a lot of grandchildren, they can have 250 pound from you. So Bob and Jane in this situation. And again, there’s no time there on that. If somebody’s getting married, there’s a married exemption you can use as well. If Bob has more money coming in and going out. So if he has a decent pension income, there’s an exemption of what’s called normal expenditure out of regular income. So again, it’s the first couple we went to couple one, there’s more money coming out that excess income they can give on a regular basis, as long as they commit to doing a regular basis, regardless of how that would generally be regarded as exempt, I would go we are quite technical and, you know, quite keen on kind of looking at all the angles for clients that are legitimate. And one of the things that sounds awful, but if Bob, in that situation has a pension fund, and his medical condition is so severe that he’s off expected, He’s severely limited. Severely limited. What we might do as part of the overall planning is look to say, Hang on, we know that pensions after April 27 are going to be subject to inheritance tax. Now, if Bob’s really, really seriously ill and he might not make past April 27 what we might look at doing, if the circumstances are correct, we might look at amending his expression of wish, to move that from the wife Jane, to leave it to the children or grandchildren, to effectively save inheritance tax. Because if he dies before April 27 and leaves it to Jane, and then she naturally dies after April 27 hopefully in a longer on time, then that pension point is likely to be subject to inheritance tax. So there’s a window of opportunity to put it to starkly, where that might be beneficial, to do it elsewhere. Now, obviously, if he survives past April 27 then that wouldn’t be appropriate or more likely to be vote because of the inheritance tax being there, but then he can reverse the expression wish and then leave it back to Jane. There’s a whole load of planning, and this is a bit we mentioned earlier about uncertainty. So the plan that we have for Bob, say, three years ago, may be completely different to what we’re doing now, because his medical situation has changed. He was hopefully fit and healthy three years ago. Something’s happened. It’s not so so good now. And this is where proactive planning and the problem is that life goes around very quickly. It’s difficult to get the time to do things. And that’s why, if you’ll say a client of mine and Martin, which is typically around annual review, at least, we catch you once a year, so we can kind of catch those changes as they happen. And of course, if you’re existing client, anything that happens in an adult situation, you have some whole medical diagnosis, whatever. Generally, you’ll pick the phone up to me and Martin. We will come out to yours. You’ll come and see us. We will then run through it all again, and we’ll say, Okay, this is no longer. The plan was, you know, we’re going to be living to 100 and hopefully it’s going to be fine. The reality is, it’s changed. What does that mean for you and your family? And it’s normally about making sure that the wife is okay first, and then tax planning separately. And we are, in our experience where people in that situation, they are very practical. People and they want to understand what’s happening. Our job is to make you, make sure the family is okay. We’ve got a lot of experience of that.

 

Martin Stanley 

Thank you. Matt Scott, let’s take another question. John wants to know. He says his largest asset is his home, and that’s the case for many people, I’m sure. Can he just give it to the children in advance he knows it’s a seven year clock, or can he put it into trust for the children. What’s a good question, John, and we often get asked this, because, like you, a lot of people’s main asset is their home, or at least a significant asset. But unfortunately, planning with properties in this way is really difficult. The reason is because to avoid inheritance act, you must have given something away, and it must genuinely have been given away for all purposes. So for example, if you gave you signed over the house to your children, but then carried on living in it as you normally would expect to do until the end of your life, then the tax man would deem that you hadn’t genuinely given away. The phrase is you had retained an interest, and that would mean, unfortunately, that the it just simply wouldn’t work for inheritance tax planning. You’ve not achieved what you hope to achieve. There is an alternative. Technically, you could give that home away, and then your children would be your landlords, and if you paid them a fair market rent to live in your own home, then that would all work out. And it could be seen that you had genuinely given it away, and you were paying for the use of it. It’s it is a solution, but it has some pitfalls. I won’t go into the details now, but please give me a ring if you’d like. Go into it in more detail. But most people, frankly, don’t feel it’s very palatable to pay their children what might be quite a lot of rent to live in their own home. Similar problems arise with gifting the property into a trust, in the sense of you retaining a use of it, really the similar conclusion there. So unfortunately, it’s pretty difficult to do that with your home. There is scope. If you have a large home and you plan in advance to perhaps downsize your home to release some money, and then perhaps that money can be used for gifting in any one of several different ways, which you can explain to you. But simply signing over the home, as you sometimes hear about, I’m afraid, is not a quick answer.

 

Scott Gallacher  

Okay, thanks, Mike. I’ll just have one quick additional point. There is one interesting planning angle that should work. It’s technically an accountancy questions you need to check, but understand if one of the children is leaving with you, which are not situations is the case, and are paying their share of the bills, you can gift half of the house to them. It not be a gift for a reservation. Still was on seven o’clock, and it can be a potential benefit that. So there’s a potential it advantage of doing that. You’ve still got downfalls of that. The question is, well, what if they want their half out, that gets problematic. But also the question is about the wider family dynamics. If you only have one child, that’s less of an issue. If you have multiple child children, and even half of the house to say your daughter, who’s still living at home, which might be fair, they may be health and care for you and things for lots of reasons why that might be good at it, you then have to consider, well, what inheritance do the other children get? And at the very least, you might need to review your will, because if you’ve got, say, three children, and your Will says my my estate to them equally, and then you’ve suddenly given half of the house to the daughter, well suddenly she’s now getting, effectively, two thirds. She’s got half anyway, and she getting, you know, a third of your half that’s remaining, which then completely changes the dynamic of what people get. And again, this is one of the areas people don’t always look at the overall financial picture up, and that’s one of the things that financial planners like myself and Martin are much better able to do than say solicitors. Solicitors are very good and they’ve serve a very good purpose. There is a danger at some solicitors, you will go in and say, This is what I want to do. Please do it, and it will do it without understanding the wider family dynamic and the overall financial position, and that can just lead to mistakes. So our view is so this is a very important part of the financial planning and legal process, obviously, but our view is that anything like that really should be discussed with us as part of that process, so you get our effectively second opinion on it and to make sure that we’re not making any mistakes.

 

Martin Stanley  1:08:56

Thank you. Scott, couple couple other questions. Sharon says that they are lucky enough to have a lovely place in Spain. Why wouldn’t they just plow all their money into their Spanish property, and then at the end of their lives, it’s outside of the UK, so it’s not subject to tax. I’m afraid Sharon that as a simple answer, it doesn’t work that way, as there are a few limited exceptions, but in most cases, people in the UK are pay inheritance, act on everything they own, wherever in the world it is. There are some small exception but generally speaking, whether your property is in Spain or France or anywhere else in the world, it’s still all assessed by the UK tax man. So that’s not an option for you, I’m afraid.

 

Scott Gallacher  

Yeah, thank you. About Martin, as we said, if you want to email marketing for the book, that’s great. We’ve also got a short PDF, which is kind of seven or nine IHT planning measures that you want. So it’s fairly it’s not individual advice, but it covers some of the key things you might want to consider. If you drop Martin an email, we can email you one of those. And. Number one in there, as I recall, is spend it so that’s, yeah, that’s the other point, which we haven’t really gone into. My general go to is, well, why aren’t you spending it on yourself first? That’d be my key takeaway, absolutely, even I’m not good with it. Thank you for everyone attending. Everyone attending will get an automatic will get an email in the next day or two, which has a copy of this recording and also copy the slides and thank you for attending. I’d say, If anyone wants to talk to me and Martin, whether you’re existing clients or potential new clients, about their financial position and whether they have enough and whether they should be looking at gifting, if you just either drop an email to martin@rowleyturton.com or scott@rowleyturton.com obviously we can sort out a meeting and obviously try and help and assist you. Thank you for attending, everyone.

 

Martin Stanley  

Thank you very much.