Gifting without impacting quality of life

A recently widowed client gained great comfort following a financial review and cash flow planning exercise, knowing she could give significant sums of money to her children without impacting her quality of life.

They were able to pay off their mortgages early and she was able to enjoy giving money while she was still alive to see her children enjoy it.

Background

Our client is retired and recently widowed with two grown up children no longer living at home.

Assets

Home £400,000
Investment Property £200,000
Investments Other £100,000
Husband’s Estate £700,000

Income

Death in Service £17,000
Property Rent £10,000
State Pension £5,000

Challenges Faced

1. Insecurity about future income

Financially unaware – concerns over future lifestyle

Current investments not structured to provide income

2. Disorganised investments

After being widowed, left with poorly structured investments

Excess of paperwork overwhelming the client

Tax inefficient portfolio

3. Concerns over Inheritance Tax liability

Concerns over her estates ultimate IHT liability

But wishing to retain control of the funds

What we did

Created a simple Cash Flow Forecast for the client

Restructured her investments, creating an immediate increase in disposable income

Reduced paperwork

Ensured client used her Capital Gains Tax Allowance

Restructured death benefits from late husband’s pension arrangements resulting in :

Tax efficient giving to the children / grandchildren

Created a regular / scheduled ‘gifting pattern’ from excess income / capital

The Result

The cash flow forecast demonstrated to this client that she could easily maintain her expenditure pattern.

In addition it enabled a considerable proportion of the late husband’s pension funds to be passed to the adult children immediately which due to the trust based nature of the pension plans avoided an IHT liability and perhaps more importantly enabled the client to see her children enjoy the windfall received.