Estate planning Business opportunities This is just for UK advisers - PowerPoint PPT Presentation

Estate planning Business opportunities This is just for UK advisers – it's not for use with clients.

Important information This presentation is for adviser use only and not for retail customers, and contains some forward thinking statements which should not be taken as fact. Information given is based on our current understanding, as at (04/18), of current taxation, legislation and HMRC practice, all of which are liable to change and subject to an individual’s own circumstances. Terms and conditions of products are available on request. The level of charges may change in the future. For webex presentations, the event may be recorded for training purposes. No reproduction, copy, transmission or amendment of this presentation may be made without the written permission from Prudential. Prudential Distribution Limited is registered in Scotland. Registered Office at Craigforth, Stirling, FK9 4UE. Registered number SC212640. Authorised and regulated by the Financial Conduct Authority. Any examples included are designed to represent a typical situation and are not related to any particular individual. They do not recommend that course of action.

Learning objectives By the end of this session you will be able to understand: Client needs Planning Investment Resources and generated from opportunities considerations for support available Estate Planning from different trustees and how tax wrappers planning can help and trusts

Estate planning opportunities Estate Retirement Tax Planning Planning Connected Financially Legal State Later Life Planning

Inheritance Rax Revenue 7 6 2021/22 5 2017/18 4 £5.0bn £6.2bn 3 2 1 0 Projected increase of £1.2bn

Inheritance tax - estimated number of estates 30,000 26,000 23,000 19,000 18,000 16,000 16,000 15,000 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 100% increase over 7 years

Trustee Act Statutory Duty of Care Standard Investment Criteria Advice

The opportunity for you … ”Before exercising any power of investment a trustee must obtain and consider proper advice…”

The opportunity for you … ” the advice of a person who is reasonably believed by the trustees to be qualified An IFA!! to give it by his ability in and practical experience of financial and other matters relating to the proposed investments”

Two objectives Client Beneficiaries Solicitor IFA

Planning opportunities Reduce Reduce income tax inheritance tax Access and Simplify Control finances

Income Tax Settlor Bare Interested Interest in Discretionary posession Four categories of trust for income tax purposes. Broadly, whoever gets the income pays the tax!

Capital Gains Tax Bare Other

Tax and Collectives Gains Dividends Interest No tax No tax No tax within fund within fund within fund Trustee pays Trustee pays Trustee pays or or or Beneficiary pays Beneficiary pays Beneficiary pays

Bonds for Trustees? No income Transferable tax until a without a chargeable chargeable event occurs event Simple and flexible?

Meet Margaret Margaret’s story Margaret is a sprightly 80 year old, with 4 children and several grandchildren from new born to mid-twenties. Recently widowed in late 2017 when her second husband Victor died, she is looking to take charge of her finances. Already a widow when she married Victor she came to the second marriage asset poor but NRB rich. She’s in a good position to help her children and grandchildren when they need it. Estate and inheritance tax planning is high on her agenda.

Assets Last Year NRB £900,000 NRB Home Bank Onshore Bond Now NRB NRB £2,065,000 NRB Home Bank Onshore Portfolio Bond

Margaret’s IHT calculation 2018/19 Family home £1,500,000 AIM shares £15,000 Savings OEICs £80,000 RNRB NRB Equity OEICs £220,000 Bank account £150,000 Tapered Max 2 Onshore bond £100,000 Excess income £17,520 Asset value £2,082,520 RNRB reduction £41,260 Residence NRB (incl spouses) £208,740 Main NRB £650,000 Full Add Residence NRB £208,740 Add BPR relief £15,000 IHT Access Tax free amount £873,740 Taxable estate £1,208,780 IHT payable £483,512 Net estate £1,599,008

Margaret’s income Last Year Now PENSION £42,000 PENSION £15,000 SAVINGS £2,500 INCOME SAVINGS INCOME £500 DIVIDEND INCOME £8,000

Margaret’s Income Tax calculation Non savings Savings Savings Dividends paid gross paid gross Pensions OEIC Bank Dividends Tax Due interest interest £42,000 £1,000 £1,500 £8,000 Personal allowance (£11,850) Non savings 20% £30,150 £6,030 0% £500 £0 Savings 20% £500 £1,500 £400 40% 0% £2,000 £0 Dividends 7.5% £0 £0 £6,000 32.5% £1,950 £8,380

Deed of Variation Margaret’s Victor’s estate If she IHT Will swollen NRB dies due by Victor’s NRB If Margaret dies Discretionary Trust? trust Margaret Access and family

Hey presto, three NRBs Previous Marriage Recently widowed Margaret Reduced estate Deed of variation 100% to Margaret thanks to Deed for £325,000 of Variation 2 x NRB on 1 x NRB inside 2 x NRB on Margaret’s death discretionary Margaret’s death (thanks to previous will trust marriage) That’s £130,000 of IHT

Margaret’s Income Tax calculation Non savings Savings Savings Dividends paid gross paid gross Pensions OEIC Bank Dividends Tax Due interest interest £42,000 £0 £1,400 £0 Personal allowance (£11,850) Non savings 20% £30,150 £6,030 0% £0 £1,000 £0 Savings 20% £400 £80 40% 0% £0 £0 Dividends 32.5% £0 £0 £6,110

Post DoV IHT calculation 2018/19 Family home £1,500,000 Bank account £140,000 RNRB NRB Onshore bond £100,000 Excess income £10,690 Full Max 2 Asset value £1,750,690 RNRB reduction £0 Residence NRB (incl spouses) £250,000 Main NRB £650,000 Residence NRB (incl spouses) £250,000 Full Tax free amount £900,000 IHT Taxable estate £850,690 Access IHT payable £340,276 Net estate £1,410,414

Assets Home Bank Onshore Excess Bond Income

Planning matters … Before After £8,380 £6,110 Income Tax Higher rate liability Basic rate liability Reduced PSA Restored PSA £483,512 £340,276 Inheritance Tax No gifts made Reduces @ 7 years 2 x NRB 3 x NRB Total Access Given up: capital of £100k & Access and Control Total Control growth on £200k Tax cost! Total Control Tax return No tax return(s) Simplicity Multiple wrappers/ Trust admin simplified income types

Resources available pruadviser.co.uk/knowledgecentre Oracle publications 03457 11 12 13 Technical.Helpline@Prudential.co.uk

Learning outcomes Client needs Planning Investment Resources and generated from opportunities considerations for support available Estate Planning from different trustees and how tax wrappers planning can help and trusts

Thank you for your time If you would like to give us feedback directly or request information not covered elsewhere please email us at speakernotes@prudential.co.uk