Carol & Greg Patrick

The generous retirees


Now in their late 60s, Carol and Greg had been enjoying their retirement for a couple of years and had developed a good routine. Mondays and Tuesdays were grandparenting days. The rest of the “working week” was taken up with classes, with them also volunteering for a charity as well as campaigning for their favourite environmental charity. Then the weekends were generally reserved for visiting friends and family.

They had saved wisely and having invested for many years; their assets had increased in value quite considerably.

Carol had been a GP for more than 30 years and she now benefited from a good final salary pension. Greg was the commercial manager for a large chain of estate agents. In the years before he retired, his Good Green Money adviser helped him get a handle on and organise the various pensions he had accumulated, which culminated in him now taking an annual drawdown payment. When combined with Carol’s pension, their State Pensions and the rental income from their buy-to-let property gave them more than enough income to live on in retirement.

They had also saved wisely over the years and having invested for many years; their assets had increased in value quite considerably.

Now that the retirement dust had settled, they were keen to reassess their affairs in light of their current circumstances.

Before now, Carol and Greg had largely worked on building up their pensions and investments in anticipation of retirement. They wanted to make sure that they were going to be secure and wouldn’t ever have to worry about money again. This they had done very successfully with the help of their adviser. Greg liked having his drawdown pension in place as it gave him some flexibility and along with their other money and investments, they were able to live life as they wanted.

However, now that the retirement dust had settled, they were keen to reassess their affairs. As well as making sure they had enough to cover their annual expenditure, the financial modelling that their adviser had undertaken for them also reassured them that they should have enough to cover any potential care home costs. They had put Lasting Powers of Attorney in place, appointing their children as Attorneys, but hadn’t looked at their wills for some years.

Inheritance Tax was of great concern to them now. They had no problem paying tax generally but when it came to Inheritance Tax, they were a little more reticent. They wanted to start gifting money to their children and grandchildren now, but not to such an extent that it could have a negative impact on their own circumstances. They weren’t sure what to do with Greg’s inheritance either.

They had always been very generous with their charitable giving. They intended to keep this up and leave some sort of legacy in their wills. Finally, they have been very pleased with our expertise when it came to investing ethically and this was something they wanted to keep in place.

This was a crucial point in their lives when it came to relying on sound financial advice. Via a series of effective, interconnected recommendations they were able to meet all of their objectives.

Firstly, we re-assessed their personal financial needs, including updated financial modelling assuming that they’d both need to pay for care in the future. We stress-tested this to allow for unforeseen occurrences to make sure that their finances would remain robust. This allowed us to work out what assets might be surplus to requirements.

Secondly, we undertook a detailed Inheritance Tax assessment and estimated what tax could be payable upon the second death. As they feared, the potential tax bill was sizable, running to more than a million pounds.

We then created a gifting strategy that had many parts to it. It became clear that they weren’t reliant on their rental income. Rather than sell it, they gifted it to their daughter who would take over as landlord and start receiving the rent. This could have caused a Capital Gains Tax problem, but Greg still retained a lot of shares in a defunct company that he bought just in 1999. By disposing of these in the same tax year, the loss wiped out the flat’s capital gain, meaning no tax fell due on disposal. Once Greg lived another seven years, the flat would no longer form part of his taxable estate.

To keep things fair, we cashed in a chunk of their ISAs, and gave the money to Greg. Further, they started making gifts to their son equivalent to the rent that their daughter received from the flat, which was immediately outside of their estate for Inheritance Tax purposes.


What they really liked

We moved some of their investments into more Inheritance Tax efficient ones. They also revised their wills to leave 10% of their residual estate to charity. This meant that any future IHT would be levied at 36% instead of 40%.

Finally, we set up JISAs and pensions for their grandchildren which they paid into every April, and they changed their pension beneficiaries to their children and grandchildren too. The combination of these measures met all of their goals, including reducing their potential Inheritance Tax liability on second death by almost ÂŁ1 million.

We re-assessed their personal financial needs, including updated financial modelling assuming that they’d both need to pay for care in the future.

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