open . She wants to make the decisions about what happens with her money while she ’ s alive . And she wants to pass on as much of her estate as possible to her loved ones when she passes away .
Ben then suggests life insurance as an option to explore , because although it doesn ’ t provide relief from inheritance tax , it is an option to pay for it .
“ All those medical questions ? No thank you ,” is Carol ’ s definitive reply .
Ben introduces Carol to Business Relief
At that , Ben mentions investing in shares expected to qualify for Business Relief ( BR ), which Carol could fund by selling some of the shares she inherited from her late husband . A BR-qualifying investment can be passed on free from inheritance tax on death , as long as it has been held for at least two years at that time . The investment would stay in Carol ’ s name , meaning she should be able to access some or all of the capital later on if she needed it .
For the first time in the conversation , Carol ’ s interest is piqued . This could be a way to pass more wealth to her beneficiaries while retaining control of it while she ’ s alive .
Ben also explains the risks of making a BR-qualifying investment . It would involve holding shares in one or more unquoted or AIM-listed trading businesses , and the value of her investment , as well as any income from it , could fall as well as rise . Carol would need to be comfortable that BR-qualifying investments are higher risk than more mainstream investments , and she may get back less than she invests .
In addition , Carol should bear in mind that HMRC assesses BR when the estate makes a claim after she has died . Entitlement to the relief will depend on any companies she invests in maintaining their BR-qualifying status such that they qualify at that time . Tax treatment will depend on personal circumstances , which could change in the future .
Ben also makes clear that withdrawals can ’ t be guaranteed , as the shares of unquoted companies or those listed on the Alternative Investment Market ( AIM ) can be harder to sell than those on the London Stock Exchange ’ s main market . The share prices may also be more volatile .
Carol wants to know more about Business Relief
Carol agrees to take some literature , and she books a follow-up meeting . Like many estate planning decisions , this one may take a few conversations before Carol decides what she wants to do . But for the first time , she is actively engaging with the idea . That ’ s because she now realises estate planning doesn ’ t necessarily involve giving up control of assets or being assessed by doctors .
Even if a client decides this type of investment is not for them , introducing the idea of BR-qualifying investments , can be a good way to unlock the wider estate planning conversation .
In a survey commissioned by Octopus in June 2024 , investors surveyed were aware of the more common inheritance tax planning strategies such as trusts , gifting and pensions . But only 31 % were aware of Business Relief , an alternative way to plan for inheritance tax . And when asked , the majority surveyed would want their adviser to talk to them about Business Relief . 1
Next steps
Look at Carol ’ s scenario in more detail . In this planning scenario we dig into the numbers further to show how a BR-qualifying investment could mitigate her inheritance tax liability .
To find out more about BR-qualifying investments , as well as resources you can use to support your estate planning conversations , we have a dedicated BR webpage .
If you have a question on inheritance tax and estate planning , then Ask Octopus . One of our team of experts is on hand to help . Simply fill out your details and question and we ’ ll support your technical query . Alternatively ask your question by booking a meeting .
1
Survey of 1,000 UK adults with investments partly or fully managed by an adviser , and 200 financial advisers , research conducted by Opinium for Octopus Investments , June 2024 .
BR-qualifying investments are not suitable for everyone . Any recommendation should be based on a holistic review of your client ' s financial situation , objectives and needs . This communication does not constitute advice on investments , legal matters , taxation or any other matters . Personal opinions may change and should not be seen as advice or recommendation . Issued by Octopus Investments Limited , which is authorised and regulated by the Financial Conduct Authority . Registered office : 33 Holborn , London EC1N 2HT . Registered in England and Wales No . 03942880 . Issued September 2024 . CAM014355 .
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