James

Mitigating Inheritance Tax liability

Scenario

James was 55 and having worked in the city all of his career had built up large portfolios of shares, pensions, property and cash. He was divorced with three children.

He had decided to take early retirement and approached us wishing to understand the best way to generate an income from his pensions. He was also keen to ensure that his assets were structured to generate a return that kept up with inflation and wished for these to be professionally managed going forward.

Actions

We discussed James’ expenditure requirements and overall objectives. He had always lived a relatively modest lifestyle, and whilst he wished to enjoy his early years of retirement, did not envisage much change to his current spending patterns. He wanted to ensure that he could live comfortably, but also be in a position to pass as much capital as possible to his children.

We reviewed his current holdings and discovered that his pensions were held within various personal pension arrangements. He had several cash ISAs and his shares were primarily in a single company, as these had been acquired through his employment.

Analysis

Looking at James’ overall net worth, it was clear that there was potentially a large Inheritance Tax (IHT) liability on his estate that would be due following his death.

From our cashflow modelling, we could see that James’ total assets were sufficient to meet his needs for the rest of his life. We therefore discussed his objective of generating income from his pension, particularly given that the capital within the pension would currently be considered as outside of his estate for IHT.

We reviewed his non-pension assets and concluded that whilst he had a relatively diversified portfolio, no single asset was in line with his attitude to risk. His cash holdings were all low risk and not keeping up with inflation, and his share portfolio lacked diversification.

We recommended that James’ pensions be consolidated into one arrangement which allowed him to benefit from a single charging structure. We also recommended that his non-pension assets be restructured into a diversified investment portfolio, aligned to his attitude to risk. We introduced him to an investment manager, who would create and manage the portfolio, making best use of his various tax allowances.

We then recommended that, rather than take income from his pension, we meet his income needs from the non-pension assets within his portfolio. This allowed him to maintain his lifestyle, whilst reducing the value of his estate and in turn his potential IHT liability. By leaving the pension untouched, this fund would be allowed to grow whilst being outside of the IHT regime. James would always be able to access the capital if ever required.

Outcome

James came to us with a clear plan but was considering each of his assets in isolation. In order to achieve the best outcomes, it’s essential that a holistic view to financial planning is taken.

Whilst capital can be invested in similar ways, the tax treatment of different products means that they can be used for different means. This may mean using a product to achieve a goal that it was not originally designed for, but which may ultimately lead to a superior outcome.

What our clients say

The people we help are at the heart of what we do. Here are some of their testimonials.

I knew I needed to begin saving and planning for the future but didn’t know where to start. Stratton helped me to understand my finances and put together a savings plan that is affordable and works for me. I now have and an ISA and a pension, and whilst retirement is many years away, I have the peace of mind that I am saving for my future. I look forward to working with them for many years to come.

Martin Corrigan -

A client since 2016

I have been impressed with the advice and service provided by Stratton Wealth Management and have always found Darius to be approachable, dependable and highly professional in his approach. It is reassuring to be able to have such a high level of confidence and trust when it comes to financial advice.

Russell Jones -

A client since 2018

Many thanks indeed for your in depth report for my client Mrs H – it is most thorough and above all readable. This might sound particularly strange; however you may well gather that in my profession we see many such reports, and I often feel that if the adviser fills it with charts and graphs it evidences a level of research. In truth most of what is produced is readily obtainable from the internet.

I would like to thank you (and your organisation) for your prompt and professional attention to my requirements on behalf of my client. As a practice we shall definitely be putting Stratton Wealth Management on our “preferred supplier list".

Colin Dunstall, Donaldson Dunstall Solicitors -

A client since 2015

I would highly recommend Darius and John. I’ve used a financial adviser previously and could never get in contact with them when I needed their help. Stratton Wealth Management have been excellent from the start. They are always available to talk, and they also don’t talk in financial jargon!

Dave Rigby -

A client since 2015

Having recently transferred my financial management to Stratton Wealth Management, I have been extremely impressed with the highly professional service I have received. I feel I have been fully involved in all decision making, and the company's highly skilled advisers have shown commitment and patience in any dealings I have had with them. I have also always found them to be easily accessible for any discussion I may require.

Denise Thornton -

A client since 2019

As a business owner and father of four children, finances are usually the last thing we think about. Stratton oversees and manages our finances, both in terms of advice for my business and our personal investments. It is comforting to know that our retirement, investment and life insurance planning has been taken care of. Darius and John are always so efficient in dealing with our affairs. As someone with no real understanding of the ins and outs, it has been fantastic to have experts giving us great advice and making sure our best interests are always the top priority.

Lee and Claire Parkinson -

Clients since 2016

Darius deals with my family’s finances and is a very trusted adviser. We meet a number of times a year, but I know I can call him any time if I have any questions. He is proactive, helpful and friendly!

Jonathan Dennis -

A client since 2019

Darius has been our adviser for a number of years, and when he told us he was starting his own firm, we had no hesitation in moving with him. We had a number of areas that we needed help with, including the complexities around an employee share scheme, investments for us and our new child, in addition to our retirement planning. Darius has continually provided us with a first-rate level of service and we would highly recommend Stratton.

Eamon and Holly O’Hara -

Clients since 2017

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