Nine out of ten people are set to be hit by an “outmoded” inheritance tax system, says specialist fund manager Way Group. It says it is offering a new scheme to help accommodate the “dramatically increasing” number of estates affected.
Way Group says actuarial data suggests approximately nine out of ten 70 year olds in the future will live for the minimum seven years required to qualify for inheritance tax relief. It says this means they will not need to take advantage of any discount on their initial gift.
It says its Duo Inheritor Plan enables the client to discount gifts into trust without ‘locking in’ funds like a traditional discounted gift plan. The plan delivers a discount on the gift into trust which, it says, also offers flexibility on over 60 per cent of the amount gifted. The plan is linked to a unit trust open ended investment company.
WAY Group chairman and technical director Paul Wilcox says traditional approaches and products for IHT planning have become outdated. He says: “Clearly a discount value to any amount gifted is essential for the ten per cent of 70 year olds who will on average not make it through the seven year period before gifts fall out of account – and are able to escape the 40 per cent tax hit – but we are more concerned that the vast majority, the other 90 per cent, who don’t need the discount are not penalised and can take advantage of a flexible arrangement that gives the best of both worlds.”
Wilcox says the discounted gift is created by delivering regular monthly drawings for the first eight years in the form of fixed reversions. He says: “Interestingly – and as to be expected since 8 years of drawings represent an increasing proportion of older life expectancies – the discount difference between Duo and traditional schemes disappears as the donors get older, as you can see from the following abbreviated table.”
He adds: “Duo is a revolutionary and absolutely vital IHT solution for today’s families faced with rising longevity – the donor and family can benefit from a discount to the initial gift and yet retain flexible access to the majority of the gifted funds.”