Keeping it in the family


We explained to Robert that when a LPA is in place and the donor lacks capacity to make their own decisions, the only way to create a new trust is to apply to the Court of Protection.  This could take a long time to complete and with no guarantee that permission will be granted.  Therefore, we recommended that Robert retained an investment portfolio valued at less than his father’s available nil rate bands, which included his mother’s nil rate band that transferred to his father when she died.  The surplus would be invested in an equally accessible and flexible solution that, as his father’s attorney, is available to Robert without the need to seek permission from the Court of Protection.

The solution we recommended qualified for Business Property Relief, which meant that the money Robert invested ‘fell’ out of his father’s estate after 2 years and became ‘free’ from Inheritance Tax.  Robert now has peace of mind, knowing his father is able to receive the care he needs for the rest of his life and with the family’s hard-earned wealth safe from unnecessary tax bills.  He will fulfil his Dad’s wish that the family should enjoy his wealth.

Know the risks:  Investments that qualify for Business Property Relief, such as Enterprise Investment Schemes, can carry a higher degree of risk than ordinary mutual funds and may not be suitable for every client situation.  It is important to take independent financial advice before making any decisions to invest in an EIS and there is a significant risk that you may not get back the same amount that you originally invested.  The Financial Conduct Authority does not regulate trusts and some aspects of Inheritance Tax Planning.