Joan & Phil’s story

Joan and Phil had three main requirements:

1. They needed enough income to cover their lifestyle for the rest of their days
2. They were concerned that Inheritance Tax would erode the wealth that they planned to leave to their daughter
3. Finally, they wanted to provide financial support for their grandchildren’s education (a big gift was out of the question as their daughter’s marriage was not in great shape)

We worked with Phil and Joan and used cashflow modelling to establish what income and capital they were likely to need to support themselves in the future. They didn’t understand most of the other investments they held – or whether they were even suitable or doing well. We discovered that their existing investments were not suitable for their financial objectives and attitude to risk – they are cautious by nature and didn’t want to invest in anything too risky. What’s more, these investments had not been performing well. Meanwhile, their cash was not producing enough income and they weren’t taking advantage of tax benefits (such as ISAs).

We constructed a more appropriate and tax-efficient investment portfolio

Firstly, they decided to keep the buy-to-let properties which were held in a company. We worked with their accountant to amend the share structure of this company and reduce Inheritance Tax liability. This also provided tax-free income direct to the grandchildren to help with the school fees.

We then built a more diversified investment portfolio to generate the income they needed without taking on unacceptable risk – while offering the potential of modest capital growth. We also put part of this portfolio in a trust. This meant the couple retained control of their wealth during their own lifetime and could draw money as required. It also meant that any remaining investments would pass free of Inheritance Tax to their daughter when they were gone.

We continue to manage their investments and are in regular contact to ensure their plans remain on track.