Investing in an IHT exempt portfolio is just the first step, why not also transfer the assets into trust?
You may be safe in the knowledge that you have invested in an IHT exempt portfolio qualifying for Business Relief and, in theory, 100% exempt from IHT after 2 years. Have you considered the fact that the moment the government changes the rules on the relief, many of these investments could lose their IHT exemption? I have found that many clients do not understand that the relief is yet to be claimed (the claim being made on death). These assets are still exposed to the uncertain future ahead of us and are still in the estate for IHT, should the relief change.
Why not double wrap these assets by transferring them into a family trust. Of the many rumoured tax changes, trusts so far seem unaffected. The transfer into trust enables the Business Relief to be claimed now while we know the assets qualify under the existing rules. Business Relief will mean no entry charge into the trust. You also have the option to ‘holdover’ and defer any gain, if appropriate.
If the assets remain in the trust for a further 7 years, they will be outside the estate regardless of the relief. If the Business Relief rules are changed and the relief is restricted or scrapped, the assets are already well on their way to being sheltered regardless. If the transferor dies within 7 years of the assets being transferred into the trust, then they will still qualify for Business Relief assuming the rules have not changed and the investments are still qualifying. If the rules have since changed, transitional provisions for claims already made are likely. Also, a quirk in the legislation means the clawback rules are more favourable for a trust than an outright gift leaving the transferor’s personal nil rate band intact in any event.
Finally, removing IHT exempt assets from the estate will also reduce the estate for the £2m test for the residence nil rate band. Another, reason to ensure your assets are double wrapped – invest in Business Relief and transfer into trust while you still can.