Clients with large pots of assets typically don’t want to give up control of their portfolio, but wealth managers can navigate this by focusing on income-generating assets.
Minesh Patel, a financial adviser in London, said: “Older people tend to want to keep control of the assets, this can be because they worked hard to build the pot up, or because they are uncertain about the future, or they are worried about the behaviour of their children.
"That could be related to the durability of the heir's romantic relationships, or if the heir has a problem with addiction That makes it difficult in some cases to create an IHT tax strategy, but what I tend to do is put the client portfolio in to assets that pay an income, the client can then distribute the income, but retain control of the capital.”
Emi Page, who works within the private client practice at law firm Winckworth Sherwood, said the annual amount which can be gifted free of tax is £3,000 or £5,000 if the receiver of the gift is getting married or entering into a civil partnership, while there is no limit on gifts between spouses.
Gifts exceeding that amount may be counted as part of the client’s estate on death, and therefore may incur inheritance tax later.
Alan Kinnaird, head of business development at wealth management firm Walker Crips, said: “For many it can be a challenging time as for larger estates it can mean having to give up control of some assets in order to bring their potential liability down. Clients' emotions do play a major part -especially where they are used to holding and administering fairly large portions of their family’s wealth.
"It is always best for clients to review their IHT liabilities on a yearly basis as this helps to avoid a feeling that their decisions need to be rushed into.”
Anna Warren, tax director at wealth management firm Bentley Reid, said when discussing inheritance tax planning, wealth managers should try to ensure it is a “collaborative” excercise, so that the client never feels they are losing control of their assets, and that the client doesn’t feel “overwhelmed with detail.”
