Case Study:
John


John and Mary Salisbury have been married for 35 years and have two daughters aged 32 and 30, Abigail and Jane. Abigail is divorced with two young children aged nine and six, Jane is currently in a long-term relationship and currently does not have children. Both Abigail and Jane are high achievers, with Abigail being a qualified accountant and Jane enjoying significant success in business.

Legacy


The period following Abigail’s divorce was a difficult one for the family, with Abigail’s work demands restricting the amount of time she could spend with her young children; although Abigail is a high earner the divorce left her with little capital and a relatively large mortgage of £150,000.

Having built a successful business, John and Mary retired in their late 40s, their income being provided from private pension plans and capital achieved on the sale of their business. Our regular financial modelling of their situation indicated that their capital position would improve over the years ahead and, indeed, had improved significantly since their retirement.

John and Mary asked us to model a scenario where they would make gifts of £150,000 to Abigail and Jane, their reason being that they would like to treat both girls equally, even though the problem they were attempting to solve was Abigail’s. They felt that if the burden of the mortgage was lifted from Abigail she would be able to take a less “high-powered” job and devote more of her time to her children. We modelled a number of scenarios for John and Mary, showing the effects of the gifts at various levels right up to the £300,000 ideal scenario; having demonstrated to them that such a gift would not affect their lifestyle, they decided to go ahead.

The Result


  • Abigail has a job with much more regular hours and spends much more time with her children; John and Mary’s grandchildren are happier and so they are happier.
  • As the gifts fell within John and Mary’s nil rate band’s there is no immediate inheritance tax liability and the gifts will fall outside their estate seven years after they were made, with an inheritance tax saving of £120,000.
  • Jane’s gift has enabled her to contribute to the purchase of a more substantial property, purchased together with her long-term partner. It is Jane’s dream home.
  • In sum, John and Mary have successfully made gifts which will result in inheritance tax savings of £120,000, Abigail and Jane are substantially financially better off, but much more importantly, every member of the family is much happier.

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  • Chartered Institute For Securities & Investment
  • Financial Planners Chartered