Navigating Inheritance Tax: Expert Advice On Estate Planning London

A significant aspect to considering inheritance tax advice in the UK for most affected people is always going to be dependent on property values. Considering London’s population and average property values being the highest in the UK, it presents a unique challenge for effective estate planning in London. This is because the value of a London home can use up one’s inheritance tax exemption entirely. This could present an unintended consequence where asset rich, cash poor families would need to sell a home to pay the inheritance tax bill or pay high rates of interest to fund it.

Estate planning in London intertwines the challenge of a greater exposure to inheritance tax with asset illiquidity. Without inheritance tax advice families risk their ability to retain an income generating asset that can improve the financial well-being of beneficiaries. Therefore, inheritance tax needs to assume a pivotal role in the financial narrative of parents and children alike.

Overview of Inheritance Tax

Inheritance Tax is a 40% levy on a deceased person’s estate applied when assets pass down to lineal descendants. The estate compromises of everything you own; property, investments, cash, personal belongings but it excludes money purchase pensions and assets that qualify for business relief.

Every person has an allowance on which they can pass down assets without paying Inheritance Tax. This is called the standard Nil Rate Band (NRB) and it is £325,000. A married couple can utilise the inter-spousal exemption meaning the NRB passes to the surviving spouse on 1st death and the combined NRB value of £650,000 can be used before any tax is paid when the surviving spouse passes away.

An additional Inheritance Tax allowance called the Main Residence Nil Rate Band (RNRB) can be used when a primary residence is passed on to direct descendants, such as children or grandchildren. The RNRB is £175,000 and the inter-spousal exemption can be used meaning a total of £1,000,000 of allowances is available to married couples. One needs to be mindful, however, that the RNRB tapers away for estates valued over £2M.

Estate planning in London is complicated by lofty property valuations combined with the likelihood that mortgages will be (and should be) paid off in old age and by the time Inheritance Tax is due on death. Should mortgages not be paid off or there not be an appropriately structured insurance policy in place, the lender will eventually demand the repayment of their loan, which could require the sale of the property, which may trigger Capital Gains Tax at rates as high as 28%. Should you die a few years later, those unspent sale proceeds could then be subject to inheritance tax at 40%.


There are several ways to reduce or manage your exposure to inheritance tax, and it goes without saying the best time to start estate planning in London is yesterday but seriously you should be obtaining tax planning and financial planning advice from the moment you realise you are building wealth. This is because the decisions you make whilst you are building wealth could ensure that you are structuring your wealth in the most tax-effective way from day 1 which could avoid expensive planning solutions later in life that could amount to tens of thousands in advice and implementation fees.

Here’s 6 effective estate planning in London strategies to consider

  • Put in place specialist wills and multiple trusts with expert trustees
  • Put in place correctly structured life policies; this is more than assigning your life policy into trust.
  • Set up a clever alphabet share company structure from day 1 of your property investment portfolio.
  • Gift strategically during lifetime.
  • Don’t just think of a pension as a retirement planning vehicle but also as a succession planning vehicle.
  • Diversify your investment holdings and your tax wrappers.

In conclusion, navigating inheritance tax in the UK is a labyrinth, with estate planning in London presenting additional challenges due to higher property values. Therefore, meticulous planning to ensure optimal wealth preservation for the next generation is crucial.

Dear Judges, the McCloud judgement gives you an intergenerational wealth transfer opportunity you need to know about

Circuit judges and pension changes

Pensions are among the most complicated tax wrappers we have in the UK. There are many different types of pensions, and each have their own unique criteria. Even I as a professional, with over 15 years in financial planning including as a senior adjudicator, holding advanced pension qualifications including Chartered status must remind myself on the intricacies of certain types of pensions that I don’t come across every day. However, I try to take comfort in that I know what questions to ask and what must be considered when unfamiliar legacy plans come across my desk.

The first thing you need to know, and this applies to those who aren’t judges too, if you have an occupational pension plan, your pension payment is taxed under PAYE before you receive it. This means you will be liable to UK tax even if you become non-UK resident in retirement. This contrasts with a personal pension or a Self-Invested Personal Pension (SIPP) which will suffer local tax rates. Therefore, should you become a resident in a lower tax jurisdiction in retirement, you could access your personal pension or SIPP with little or no tax consequences.

The second thing I’d like you to know is when we use the word “pension”, it can have several meanings, for instance, the value of the underlying fund or the actual income you receive or are due to receive from the pension provider.  In this article, when I use the word “pension” I’m referring to pension income or merely the all encompassing tax wrapper.

The History

This all stems from the long-foregone coalition government who in June 2010 had established an Independent Public Service Pensions Commission to look at “the long-term affordability of public sector pensions, while protecting accrued rights”.  In March 2011 the Commission recommended the following:

  • replacing the existing pensions which were linked to the members final salary to one that was linked to career average earnings.
  • increasing the pension commencement age to align with the state pension age for all schemes except the armed forces, police and fire services which would have a pension age of 60.

The Government accepted these reforms, and they were legislated into the Public Service Pensions Act 2013 which became a framework for new schemes introduced from 2015 (2014 for local government). The idea being the various public sector schemes would go on to attempt to manifest this framework in their new pension schemes for their employees to ensure the long-term sustainability of the traditionally lucrative public service pensions.

However, the manifestation of the framework on the new judges’ pension would go onto have severe ramifications across ALL public sector schemes. So, what happened?

On 1st April 2015, a New Judicial Pension Scheme (NJPS) was introduced, membership of which was less attractive than the original Judicial Pension Scheme (JPS). To reduce the negative impact of the NJPS on those closer to retirement there were transitional provisions. Those provisions allowed judges to remain members of the JPS by reference to their date of birth if it was better for them.

  • Existing members of the JPS who were born on or before 1st April 1957 would have full protection, could continue in the JPS. Ultimately, the potential benefits under the final salary JPS would be compared with the career average scheme and whichever was higher would be paid. This was the original “statutory underpin” protecting the older members.
  • Existing members of the JPS who were born between 2nd April 1957 and 1st September 1960 are entitled to time-limited protection.
  • Those born after 1st September 1960 weren’t entitled to any protection and were excluded from active membership of the JPS.

Key Points

  • The original JPS aka Judicial Pension Scheme 1993 aka JUPRA as it was established under the Judicial Pensions and Retirement Act 1993 was an unregistered final salary pension scheme. This meant that although the pension contributions didn’t attract tax relief, contributions were not limited to the annual allowance or lifetime allowance limits. This meant judges could have a separate registered pension scheme that they could also fund without penalty. Whether they took this opportunity is another matter. Other features included (not exhaustive):
    • An accrual rate of 2.5% (1/40th) of pensionable earnings.
    • Normal Pension Age of 65 years.
    • Automatic lump sum on retirement at rate of 2.25 times the annual pension


  • The NJPS was a registered pension scheme, this meant pension contributions would be limited by the annual allowance and the lifetime allowance. This scheme was based on a career average basis rather than the final salary basis. Other features included (not exhaustive):
    • An accrual rate of 2.32% (1/43.1th) of pensionable earnings.
    • Normal Pension Age linked to state pension age.
    • Optional tax-free lump sum based on a commutation rate of 12:1. This meant for every £12 of cash, £1 of pension would need to be given up.

The McCloud judgement

Some of your colleagues, those who had limited, or no transitional protections weren’t happy with the transitional provisions. They brought claims to the employment tribunal (i) alleging direct discrimination on grounds of age (ii) for equal pay on the basis that the transitional provisions disproportionately adversely affected women; and (iii) alleged indirect sex and race discrimination. The government didn’t dispute the provisions discriminated based on age but argued that it was justified as a proportionate means of achieving their aims.

There were similar claims made in relation to the firefighter’s pension scheme but both employment tribunal cases led to the McCloud judgement in the Court of Appeal, and following 5 hearing dates, in December 2018, the Court of Appeal stated that the ‘transitional protection’ offered to some members as part of the reforms amounted to “unlawful discrimination”. Then in July 2019 the government accepted that difference in treatment would be remedied across all public service pension schemes regardless of whether individuals made a claim.

In July 2020 the government launched a consultation proposal to build the remedial action in relation to the McCloud judgement. The government response, now known as the McCloud remedy, was issued in February 2021. Here are the key points (not exhaustive):

  • Eligible members which now included qualifying younger members would now be given a legacy or reformed pension scheme benefits in respect of their service during the period between 1st April 2015 (1st April 2014 for local government) and 31st March 2022 (the remedy period).


  • The choice would be made at retirement, or just before the benefits come into payment.


  • In the meantime, members will be deemed to have accrued benefits in their legacy schemes for the remedy period. From April 2022 all active members would be transferred to the reformed schemes for future service.

Ultimately, it would be down to each public service pension scheme provider to determine how to implement the McCloud remedy when their own schemes faced a potential age discrimination issue.

McCloud remedy and the judicial pension

To qualify for the remedy members would need to satisfy the following 5 conditions:

  • They have service that takes place in the period beginning with 1 April 2015 and 31 March 2022 – this is known as the remedy period;
  • The service is pensionable under a judicial scheme;
  • The member was in a pensionable judicial office or a pensionable non-judicial public office on or before 31 March 2012;
  • There is no disqualifying gap in service (a period of five years or more);
  • The member was aged under 55 on 1 April 2012.

If you’ve been the affected, the Ministry of Justice (MoJ) will contact you first with a Preliminary Information Statement (PIS) to confirm the data they hold about your pension service, which you need to respond to within 2 months. You’d then be sent an Information Statement with an options exercise with a comparison of the estimated benefits you could’ve received under the various options during the remedy period. You need to respond to this within 3 months.

The Judicial Pension Scheme (JPS) 2022

From 1 April 2022, all members eligible for a judicial pension joined the Judicial Pension Scheme 2022 (JPS 2022), unless they opted out.  JPS 2022 is an unregistered Career Average Revalued Earnings (CARE) scheme. The pension being the average of your pensionable earnings throughout your membership of the scheme. Other features include:

  • Member contribution rate of 4.26% of pensionable earnings
  • Accrual rate of 2.5% (1/40th)
  • No cap on the number of service years
  • Normal Pension Age linked to the State Pension Age

Why this matters for you?

As judges you’re likely to be a higher rate or a top rate taxpayer. Over the years you are also likely to have built wealth that could now be liable to inheritance tax (IHT).

You should be thinking about intergenerational wealth transfer and asset preservation. This is where you can take advantage of registered pension schemes whilst still being a member of the JPS 2022.

Therefore, any surplus income can be saved into a registered personal pension or a SIPP. This will give you income tax relief at 40% or 45%, which is a highly tax-efficient way to build up additional capital. For example, £1,000 per month in a registered pension would only cost a higher rate taxpayer £600 and a top rate taxpayer £550. You could invest £60,000 per year into a registered pension and that would only cost you £33,000 as a top rate taxpayer.

If you’ve been a member of a registered pension from previous years, then you could potentially also benefit from carry forward. This is when you have not utilised the full annual allowance from the previous 3 years, and in the current tax year you’re able to “carry forward” those unused allowances to make a larger contribution into the registered pension scheme.

The magic of the registered pension is that it can be inherited by your beneficiaries tax-free should you die before age 75 or be only subject to your beneficiaries’ marginal rates of income tax if you die when you’re over 75. Crucially, registered pension schemes are not subject to the 40% IHT.

What could potentially be even better, especially where you have non-taxpaying beneficiaries such as grandchildren, is passing your registered pension into a Pension Death Benefit Trust (PDBT). This should be undertaken with a carefully worded contingent nomination. A decision to be confirmed on death.

Now, although the trust would suffer an immediate 45% tax on entry, this tax can be reclaimed when it’s advanced to a lower tax paying or a non-tax paying beneficiary. This does mean only 55% of the pension trust fund can be invested.

The PDBT allows for protection against third party threats your beneficiaries could face such as remarriage of the surviving spouse, divorce settlement claims, care costs, creditor claims and generational inheritance tax.

Intergenerational Wealth Management requires multiple disciplines and it’s crucial it is done correctly. You can download our e-book – Winning at life:       Welcome your future, maintain your assets, secure your capital, safeguard your family and plan for your future legacy via the following link:

Should you be interested in a consultancy call, please book in a slot.

Mohammad Uz-Zaman is a chartered private client wealth manager who holds accreditations across regulated financial advice and estate planning. He is also an associate member of the Society of Trusts and Estate Practitioners (STEP). He works closely with financial advisers, general practice solicitors, accountants and investment managers from several major practices. Should you be interested in exploring a B2B relationship please email Mohammad Uz-Zaman directly at


High earner, high pressure? Investment options for bigger incomes

With statistics revealing the mean salary for employees working in the UK’s financial services sector is a third higher than the national average across all industries, it’s safe to assume senior roles come with big rewards.

The average UK pre-tax salary is around £32,000; in financial services, it’s more than £43,000 – and that’s before you throw in bonuses, which are a big pull for people to build a career in the sector. Only utilities-related professions seem to have higher earning power, according to the stats.

If you’re lucky enough to work in a role that provides you with a high level of financial security, you should closely consider the best options to maximise your money. Well-thought through wealth management is key to maintaining the lifestyle you’re used to, plan for your retirement, and look after your loved ones.

We regularly help individuals working in financial services who don’t have such a strategy in place. This is often due to them lacking the time to investigate the possibilities of wealth management. But it’s also because of the complexity of financial products and regulation, which understandably puts some people off discovering more about this ‘money minefield’ when their job is complicated enough.

How to make your wealth work harder for you

Fortunately, there are lots of ways to make your wealth start to work harder for you, and for your family. Here’s a whistle-stop tour of just a few options we can help you with:

Pensions and ISAs – These are the products our clients are most likely to have explored, either through payroll or privately. They offer useful levels of tax relief, and they’re relatively simple to put in place and manage.

For example, high earners would usually fall into the 40% or 45% tax bracket. As ISA withdrawals are tax free, utilising the allowance shields wealth from high income tax. It’s all about ensuring you’re receiving the right advice to maximise your allowances.

Alternative tax wrappers – A commonly used phrase which might not mean much to individuals who aren’t involved in wealth planning, even some of those working in financial services. But understanding tax wrappers, and which will work for you, is vital to make your investment portfolio as efficient as possible – particularly if you’re already using up pension and ISA allowances.

Beyond ISAs and pensions, you can access other beneficial products such as offshore investment bonds – for example – which benefit from gross roll-up, meaning no tax within the fund. If it was an onshore bond, the gains are taxed at 20% within the bond: it’s a tax the UK fund needs to pay to HMRC. In contrast, an offshore bond is located in a tax-free jurisdiction so the gains can “roll up” without a 20% charge.

It’s vital to always seek investment advice to determine suitability, as potential withholding taxes must also be considered – alongside, of course, extracting any gains from the bond when you need to.

VCTs/EIS – Venture Capital Trusts (VCTs) are an exciting way to manage your wealth. These are tax-efficient collective investment schemes designed to boost UK start-ups and scale-ups while providing income and capital gains for investors, in exchange for the increased risk you’re taking on.

The Enterprise Investment Scheme (EIS) is similar. For 30 years, investors have been able to fund small businesses in the UK via the scheme. Typically, they are sub-£15m in gross assets and privately owned (although some list on AIM). Tax-free growth, income tax relief up to 30%, and even inheritance tax breaks are among the rewards for investors.

Is home really where the heart is?

Those are some of the investment alternatives any serious financial planning adviser should recommend, but let’s turn our attention to another that splits opinion: property.

For the past 25 years or more, there’s been a trend for high earners to plough investment into property such as housing stock. It figures – interest rates had been unusually low for two decades, and at least at the start of that cycle average house prices were far more attractive than they are now.

If you took advantage of this environment years ago, you’ll now be reaping the rewards. But property investment today comes with many warnings. Buy-to-let landlords – a trend encouraged by ubiquitous property management courses, proclaiming anyone can snap up and manage a portfolio – are beginning to encounter higher interest rates, struggling tenants and the introduction of Section 24 of the Finance (no. 2) Act 2015, meaning mortgage interest can no longer be deducted as an expense by landlords.

The profitability of property has been vastly affected as a result. Buy-to-let also contributes greatly to the nation’s inheritance tax bill, something which might not be apparent when you’re starting out.

In other words, think before you leap into this popular option. And if you do own property – whether it’s your own or a portfolio – consider using your wealth to pay down the mortgage. Most fixed-rate products allow 10% annual overpayments. The return is the interest rate of the mortgage, and it’s guaranteed. It could be an attractive option while interest rates remain stubbornly high.

ADL is on hand to help high earners make the decisions your wealth demands, to make your money work harder for you. Book a free consultation  with us today.

Using tax planning to minimise your Inheritance Tax bill

Insurance company NFU Mutual recently analysed HM Revenue & Customs receipts, finding that the average Inheritance Tax bill for the year 2018/19 was £199,000.

The standard Inheritance Tax rate is currently 40 per cent, which can result in a substantial bill for many estates. By taking tax planning action in advance, it is possible to legitimately reduce the amount payable.

The Inheritance Tax threshold

No Inheritance Tax is payable on the first £325,000 of any estate, known as the nil-rate band. This allowance is also transferrable to a spouse or civil partner if it is not used, meaning that a couple will have a total nil-rate band of £650,000. There is no Inheritance Tax payable if you leave everything to your spouse or civil partner or to a charity or a community amateur sports club.

The main residence nil-rate band

In addition to the nil-rate band, there is also a property allowance available, meaning that you can pass your home to a direct descendant (a child or grandchild) for an extra £175,000 free of tax. As with the nil-rate band, a spouse can pass on any unused allowance to their surviving spouse, giving married couples or civil partners the chance to pass on property of up to £350,000 free of Inheritance Tax.

Combining the two allowances gives an individual a potential allowance of £500,000, or £1m for a couple. The property allowance only applies to one property and your estate’s executor can nominate which one if you own more than one. For estates worth more than £2m, the main residence nil-rate band is reduced by £1 for every £2 over that limit, meaning that there is no residence relief available for estates worth £2.4m or more.


You can give away gifts during your life, but the rules around this are complex and will be strictly applied. If, for example, you should need to go into a care home, the local authority will look at any gifts that you have made, to see whether they could be classed as deliberate deprivation of assets. If so, you could still be required to pay for your care, even if you have given much of your estate away.

In addition, Inheritance Tax could be payable on gifts made during the last seven years of your life. This is charged on a sliding scale. For instance, the rate for gifts made between 6 and 7 years before death is 8 per cent, while the rate for gifts made during the last three years of life is 40 per cent, where the estate is worth more than £325,000.

Small gifts of up to £3,000 can be given each year, as well as a set amount that can be given to relatives, for example, up to £5,000 to children and up to £2,500 to grandchildren.

Reducing your Inheritance Tax liability

Money left to charity will not attract Inheritance Tax and if you leave more than 10 per cent of your estate to charity, this will reduce the Inheritance Tax rate on the rest of your estate to 36 per cent.

Assets placed into a trust will not form part of your estate for Inheritance Tax purposes, although you should seek legal advice as to the most beneficial way to set up a trust.

For press enquiries and further information on your own wealth management plans you can reach out via the contact form or schedule a call via the Calendly widget (30 min initial enquiry option) below:


Should we tax the ‘rich’ more?

Tax! A hated necessity, we recognise the need for it, but we have serious disagreements over who should pick up the tab and to what extent.

According to the IFS, the top 1% of earners in the UK pay more than a third of the UK’s total income tax, and who are the top 1%? They are those who earn at least £160,000 per year as a national average of the 1%, but in London the top 1% are those who earn more than £300,000 per year. And if you’re earning more than £70,000 per year, you’re amongst the top 5% who pay 50% of all income tax.

Does that mean 95% of the rest of the population pay the other half? No. In fact half of the population are exempt from making payments due to changes in policy such as increasing the personal allowance at a rate faster than inflation. The people who are being squeezed to fund an ever more costly UK are those on the cusp of being a higher rate taxpayer and higher/top rate taxpayers.

Higher earners are being taxed more than ever before in ever more ingenious ways which include:

  • Tapered removal of the personal allowance as income exceeds £100,000 (this causes the 60% tax, more on that later!)
  • Cuts in income tax relief for pension contributions
  • Reduction in the lifetime allowance
  • Tax on accumulated savings and investments already paid for with taxed income, only to be taxed again by way of further taxes such as capital gains tax or inheritance tax

The irony is that most of the above changes have happened under a Conservative government.

The key question is whether the tax burden on the wealthiest members of our society is a fair one. At this stage, I honestly don’t know the answer to that but it doesn’t feel fair to seemingly penalise geeks at school who opted to study, or an entrepreneur who was willing to take risks, and work 100hr weeks to build a business that goes on to provide valuable services and create new jobs. It’s also not fair that wealthier individuals fund an NHS that they are unlikely to use as they can afford to pay for private health care.

But then again if the other 95% of the population didn’t exist, the top 5% most likely wouldn’t enjoy the income that they currently receive, as it’s only because the other 95% buy or consume the products and services of the top 5% that they can command the income they do.

It’s also wrong to assume the wealthier simply work harder, lots of students work hard and lots of low-income families work incredibly hard but their income doesn’t reflect the economic contribution they make to society by simply being hardworking decent human beings who raise their families well by teaching them good values. What I believe many low-income families lack, is the opportunity to learn new skills in order to increase their income and improve their livelihoods. That lack of opportunity is not merely because of unaffordable course fees but constraints on their economic development through no fault of their own but only their circumstance.

The point I’m trying to make is good citizenship offers serious economic benefits for all as there’s less reliance on public services be it the NHS, Police or social security which should mean a healthier society, confident in the security provided with more disposable income to spend on what the wealthy have to offer. Therefore, it makes sense if the wealthy seek to be as successful as they intend to be, they need to invest in developing a healthy market.

But of course, based on the above statistics they probably have a disproportionate burden, and to risk taxing them any further, would be to risk losing an English speaking internationally mobile British educated professional to a more favourable tax jurisdiction. And when I say the ‘wealthy’, don’t think of CEOs and Directors of companies listed on the stock exchange but rather and more accurately think of talented teachers, doctors, dentists and small business owners among that category.

Ok, does that then mean we need to tax the 95% more than we are? No. They can’t afford it, and doing so, could literally cause hardworking low-income families to collapse which would also have unintended negative economic consequences. So, what’s the answer? Heaven knows and I’m pretty sure neither Boris nor Corbyn have a practical and equitable solution either. But I have some reflections which I’ll share in another piece.

Should you like to explore your circumstances please use the contact form below or book a call via the calendly widget below.

Mohammad Uz-Zaman is a private client trust and estate planning consultant who holds accreditations across regulated financial advice and estate planning. He holds graduate and post-graduate degrees and he is also an associate member of the Society of Trusts and Estate Practitioners (STEP). He works closely with financial advisers, general practice solicitors, accountants and investment managers from several major practices.

Procedural Integrity – it’s not as simple as screwing in a lightbulb

I recently came across an old Guardian piece entitled, ‘where there’s a will, there’s war’ and sadly it’s so true these days but so is my line, ‘where there isn’t a will, there’s a world war!’.

We’re seeing a whopping £5.5 trillion transfer from one generation to the next, we’re living longer, we have more debt and our incomes, for the most part, cannot service that debt. For many, an inheritance windfall is a big part of our financial plans.

There’s also that unintended move away from the traditional family structure with the general increase in divorce, remarriages, cohabitation, with newer family dynamics involving non-bloodline children. And of course, the unresolved issues that may come with it especially when adultery, abuse, and negligence are involved. You may escape the continued impact of karma by dying, but it can continue for generations to come.

The only person who often wins in a litigation, is the litigator, particularly those who operate on a no-win, no fee basis, or hourly rates.

For all service providers, having procedural integrity is becoming ever more important to protect themselves and their clients. What I mean by ‘procedural integrity’ is the importance of giving due consideration to a series of critical steps that is needed to ensure the objective can be robustly met.

For example, do you sever the tenancy before signing the will? Depends on the situation but I recall a time where both husband and wife wanted to leave all their wealth which included property to their daughter. Now if the tenancy on the property was severed first, and husband had passed away before the will was signed, the daughter could’ve lost out significantly on the value of the property as her father would’ve died intestate which would’ve meant her siblings being factored in as beneficiaries.

If, however, the will was signed first, the property being owned on a joint ownership basis would’ve passed to the wife via survivorship, and then pass via her will on her death to their daughter or she could’ve varied her distribution and directed it to her daughter following her husband’s death. Not the optimum scenario but better than the first.

How about another example where I was dealing with a wealthy elderly client who though appeared lucid, having testamentary capacity but due to the nature of her testamentary instructions could aggravate some family members? Although she believed there wouldn’t be, my job is to hope for the best but prepare for the worst. Circumstances often dictate what you can do, and, in this situation, I ensured a medical doctor certified the LPA which was around the time the will was also signed. Coupled with everything else I was satisfied that the burden of proof would lie with the one disputing, if there be one.

The planning can be even more onerous when involved with lifetime inheritance tax or CGT planning. It’s crucial to ensure planning is just as robust where it involves gifts out of surplus income, gifting for a dependent relative, gifts into trusts, gifting properties to children and retaining the rent, and much more, where the entity who could be disputing such planning is HMRC.

Often such planning involves trusts, and trusts are only as goods as the trustees which is why it’s fundamentally important to have professional trustees and highly qualified STEP accredited consultants involved in the advice and implementation of any solutions.

Affecting a suitable solution goes beyond just knowing about the concepts and drafting and filing the appropriate documentation but rather ensuring procedural integrity that allows you to know the important questions that need to be asked of a client, being aware of the potential areas of claims that could be made against your client, and investigating the implications of any previous planning (or lack thereof) on any future planning.

What can make this process challenging is knowing that the solutions are never ‘off the shelf’ as every client has a unique financial history and context that must be carefully considered and even stress tested before some of the more complex solutions are implemented.

Mohammad Uz-Zaman is a private client trust and estate planning consultant who holds accreditations across regulated financial advice and estate planning. He holds graduate and post-graduate degrees and he is also an associate member of the Society of Trusts Estate Practitioners (STEP). He works closely with financial advisors, general practice solicitors, accountants and investment managers from several major practices.

Protection; Fixed Fee V Commission

If I had known of the importance of life insurance, critical illness cover and income protection at the age of 20 I’d have put all of them in place for generous amounts of cover that I probably could’ve benefitted from multiple times by now. What’s more the premiums that I would have been charged on a guaranteed basis would’ve been paltry to what the same level of cover would cost today.

Unlike pensions and investments, most advisers still get paid by way of commission when advising and arranging a protection policy. Rarely do customers realise that the cost of their premium is higher because of the commission that is paid to the adviser. Nor do they realise that over the term of the policy they would’ve paid the life office many times more than the commission paid out.

There’s not really any more work being done for putting in place a £500 per month policy than there is for a £50 per month policy but the commission advanced could be enormously different.

I think it’s fundamentally important that customers are given a choice and its not enough to present that choice at the initial meeting but rather when customers are presented with an illustration, they are also given an illustration that’s non-commission based.

If customers could see that their savings over the term of the policy would be many thousands of pounds, they could be willing to pay a fixed fee. There are other advantages too:

  • Customers would be less likely to cancel due to more affordable premiums
  • Customers would be less likely to cancel since they’ve spent fees directly from their own ‘pockets’
  • There’d be more emphasis on the quality of the product than the cheapest
  • Advisers wouldn’t have to worry about ‘clawback’ of commission should there be cancellations within 2-4 years dependent on the life office

It also feels more equitable charging for professional advice to the customer as opposed to relying on a generous commission payment from a life company. It’s regulation today that stops the abuse of it, but there’s something to be said for the sake of having the correct advice processes from day one that’d avoid or lessen the need for customer reliance on regulation that ironically ends up costing the industry more over the longer term through increased PI cover and the FCA levy.

As for the quality of cover, I think there should be far more emphasis being made on how cover differs between providers.

Critical illness and income protection are not like car insurance and I feel it’s important customers are given clear advice how providers can differ in terms of the breadth of conditions they are willing to provide cover for, exactly how strict or generous those definitions are, and of course statistics around pay out rates and customer service.

Financial products have come a long way since the days they were peddled by distributors as opposed to today which is increasingly by highly qualified advisers who look at how to structure a plethora of financial products appropriately and protection is no different as its unlikely customers left to their own devices will know about the following 10 things:

  1. Importance of putting protection policies, including critical illness policies at times into trust
  2. Importance of structuring policies with cover over £325,000 as multiple policies
  3. Knowing the implications of putting joint life first death policies into trust
  4. Not to over or under insure
  5. The difference between ABI and ABI+ definitions
  6. The breadth of coverage
  7. The add-on benefits providers offer
  8. Implications of setting up a joint policy as opposed to two single policies
  9. Using whole of life protection policies to mitigate inheritance tax
  10. Using protection policies to cover the tax liabilities that may be incurred on a lifetime gift

Advisers today should now legitimately and confidently be able to charge a premium for the advice offered especially because the value such advice adds throughout the course of a customer’s life often means avoiding numerous pain points they are statistically likely to have by retirement as well as optimising the growth on their savings and investments.

Mohammad Uz-Zaman is a private client trust and estate planning consultant who holds accreditations across regulated financial advice and estate planning. He holds graduate and post-graduate degrees and he is also a member of the Society of Trusts Estate Practitioners. He works closely with financial advisors from several major practices.

Is it right to avoid inheritance tax? And one of my favourite ways to mitigate it.

Is tax theft by the government? I think most people would concede that it isn’t, but rather a necessary means to provide protection of life, property and human intellect. You may think of some other benefits and I’d welcome your comments but in my opinion everything else is a subset of these three. Once we’ve conceded, we are then faced with further questions such as, what is a fair level of taxation? Who should pay it? How should it be paid? And when should it be paid?

If you’ve accumulated assets having already paid various forms of tax, is it then right to have those assets taxed again?

I was listening to Professor Ha-Joon Chang, a political economist at Cambridge University and he made an interesting point although it was in reference to corporate taxation, the principles are similar. You see companies receive an incredible amount of state subsidies in the form of funding the education for the very employees who end up working for them, the development of state infrastructure such as roads, rail, powerlines, broadband and through the provision of a healthcare system and a police force. Therefore, only because the latter is all in place can companies make the sales and profits that they do.

Can the same principles then be applied to assets citizenry own, especially property? Possibly. You see house prices don’t necessarily increase due to the activity of the owner of the property but rather policies of the government, and therefore, is the argument that the government takes a portion of that growth a reasonable one? In the UK, the inheritance tax rate on wealth above £325,000 (ignoring the residential nil rate band) is 40%. I’m not sure how they’ve come up with a figure of 40%, but it doesn’t feel like such policies have made a 40% difference on the growth of one’s asset from the date of purchase. Also note, inheritance tax is not a tax on gain, it’s simply a tax on wealth upon which tax has already been paid.

I accept there is merit in the argument for some sort of tax on death, I’m unsure as to whether 40% is a fair charge or whether it’d be fairer to continue to tax the capital gain on one’s assets on death in its stead.

On that note let’s talk about avoiding inheritance tax. Avoiding inheritance tax isn’t a legal problem, evading it is. Evading is when there’s an illegal non-payment or underpayment of inheritance tax, avoiding it, is when you structure your assets in such a manner your assets don’t fall into the inheritance tax regime to the same degree, thereby reducing your tax bill.

It’s important to know that all forms of legitimate inheritance tax avoidance require you to give up your absolute autonomy over such assets. Hence in my view legitimate inheritance tax avoidance is not immoral. Although I accept there are some interesting contrary views.

Inheritance tax is generally charged when there is a transfer of value and it’s usually charged on death. Now, if you were to gift an asset during your lifetime, it’s only deemed to be outside your estate provided you survive 7 years from making that gift. Should you die within those 7 years, the value of the gift is brought back into your estate and taxed accordingly.

Should you gift your asset to your spouse, a registered charity or even a political party, as they are classed as exempt beneficiaries there is no inheritance tax to be paid on that transfer of value.

Unfortunately, your children are not counted as exempt beneficiaries and therefore should they receive a transfer of value, an inheritance tax charge on that asset is to be paid.


Now there are several exemptions and reliefs offered by the government where the 7-year rule doesn’t apply and so when a transfer of value occurs it’s deemed to be outside of one’s estate immediately. They are:

  • gifts upto the annual exemption of £3,000 in each tax year (Section 19, Inheritance Tax Act 1984)
  • regular small gifts of upto £250 to multiple people in each tax year (Section 20, Inheritance Tax Act 1984)
  • normal expenditure out of income; provided there was a regular pattern, made from income and it didn’t affect one’s normal standing of living (Section 21, Inheritance Tax Act 1984)
  • gifts in consideration of marriage upto £5,000 to a child, £2,500 to a grandchild, £1,000 to any other person (Section 22, Inheritance Tax Act 1984)

The above exemptions are often paltry to the size of one’s estate and do little to mitigate the effects of tax immediately thereby leaving advisers to put in place more sophisticated strategies. There is, however, an area of legislation that’s oft forgotten which is found in Section 11 Inheritance Tax Act 1984.

This provision exists where one party of a marriage makes a gift to a dependent, such a person could be a spouse, child or relative. The gift is not deemed to be a transfer of value and so it’s deemed to be immediately outside the transferor’s estate.

Scenario 1

Consider the scenario of where there’s a minor child who has 10 years of full-time education remaining at a cost of £40,000 per year plus university fees of £20,000 per year for a 3-year course. Structured properly that could remove £460,000 out of the parent’s estate immediately.

What I’d be thinking is transferring the £460,000 into a discretionary gift trust, and due to Section 11, there wouldn’t be a chargeable lifetime transfer of 20% that is ordinarily charged on similar lifetime transfers. Should the parent die, that trust fund doesn’t form part of their estate for inheritance tax.

Scenario 2

Consider a second scenario involving a dependent elderly parent who needs live-in care, what I’d be thinking is to purchase a 2-bedroom property, of reasonable value, let’s say £325,000 for their parent which will also be occupied by the live-in carer. Under section 11, that purchase is not a transfer of value. It’s immediately outside of the adult child’s estate as the purchase is for a dependent relative i.e. parent.

Now, with appropriate wills and trusts in place for the parent, once that parent passes away, their property falls into appropriate trusts which do not fall (or return) to the estate of the child thus avoiding generational inheritance tax; that is successive charges of inheritance tax on the same wealth as it passes down generations.

Both scenarios require careful planning but are feasible. It’s also clear that the transferor needs to give up a degree of autonomy in order to mitigate the tax threat but when you’ve got a few hundred thousand as a potential liability it could be a worthy trade.


On a final note, I can’t stress the importance of diversifying your assets enough. Those with most of their wealth in property will have a difficult time in mitigating tax which may require liquidating their portfolios, taking riskier strategies involving equity release or specialist strategies involving limited incorporation with alphabet share classes (not a quick fix, often taking several years to structure properly)…but maybe I’ll write about that another day.

Should you like to explore your personal circumstances, complete the enquiry form below or book a call via the calendly widget below.

Mohammad Uz-Zaman is a private client trust and estate planning consultant who holds accreditations across regulated financial advice and estate planning. He holds graduate and post-graduate degrees and he is also a member of the Society of Trusts Estate Practitioners. He works closely with financial advisors from several major practices.

How financial advisers can add more value

The need for quality financial advice is increasingly important due to several factors, notably poor financial education, lifestyle creep, and inheritance windfalls. In a nutshell, we have a society that lacks basic financial competency to manage their own personal budgets, who seek and pay for a lifestyle beyond that which they can realistically afford on credit cards and personal loans and then ultimately expect to pay off the said accumulated debt by way of an inheritance windfall.

Financial advisers pay little attention to these matters, largely because they tend to focus on individuals who’ve managed to escape the above and into financial solvency, which often equates to having at least £100,000 in investible assets or in accumulated pensions. In this climate, there’s an argument for much needed financial coaching to sit alongside other service offerings such as financial planning and wealth management.

The value of a financial adviser should be to mitigate the impact of volatile economies, volatile markets and even volatile lives. This is done by carefully considering a clients’ life plan and financial context and putting in place tailored protection, investment and retirement plans. But unfortunately, too many financial advisers fail to recognise the threats to their client’s wealth, that doesn’t come from poor fund management or a lack of diversification or a downturn in the markets, but rather from:

  1. inheritance disputes that are increasing year on year
  2. increase in divorce settlement claims
  3. a poorly structured early inheritance
  4. a failure to inheritance plan
  5. a failure to gift cash and property to children efficiently during their lifetime
  6. a failure to advise due to a client’s loss of mental capacity

For the first time ever in British history, we will see a staggering £5.5 trillion pass from one generation to the next over the next 30 years. Poor planning or lack of planning will see financial advisers’ assets under management dwindle as they’ve failed to build a relationship with their clients nearest and dearest who need advice on how to best access any inherited wealth and to also improve their clients’ chances of receiving an inheritance that isn’t otherwise whittled away due to poor structuring.

Further, financial advisers need to become conscious of the plethora of claims that their clients’ estate could be facing as a result of inheritance disputes due to unresolved fracture lines coming to the fore post-death.

Ultimately there is no substitute for face to face advice, as financial advisers tend to see their clients every year to learn about their developments and tailor any plans; there is no other profession that offers the frequency of contact with a qualified and experienced professional about one’s circumstances.

But in order to strengthen their proposition for a time poor and cost-conscious market, advisers need to be aware of asset preservation needs where they can leverage the support of qualified practitioners who can solve the above pain points but also identify further regulated planning opportunities.

Mohammad Uz-Zaman is a private client trust and estate planning consultant who holds accreditations across regulated financial advice and estate planning. He holds a BSc (Hons) in Psychology & Sociology and an MA in Islamic Studies. He is also a member of the Society of Trusts Estate Practitioners, holding the STEP Advanced Will Writing Certificate. He works closely with financial advisors from several major practices.

Sources: (inheritance disputes)

The problem with generic life office trusts

Life office trusts were primarily designed to ensure the policyholder’s life policy wasn’t part of his or her estate on their death and so would not be liable to inheritance tax. This also meant, the life policy proceeds wouldn’t form part of the administration of the estate of the deceased policyholder, known as probate, and so meant beneficiaries would receive the proceeds a lot quicker. Unfortunately, that’s probably where the benefits really stop, and many more important problems begin.

Here are 4 big problems:

  1. No professional trustee

This means there’s nobody competent to guide lay trustees on how best to access trust assets, not only tax efficiently but also whilst retaining the very protections against third party threats the trust was set up for in the first place.

For instance, if you’re a beneficiary and you’ve a problem with your ex-spouses’ divorce lawyer or a creditor you are going to wish you had professional trustees in your corner. This is of course notwithstanding the plethora of changes to legislation that could affect how best to also access trust funds. Without a professional trustee, lay trustees are ‘blind’.

  1. Broad beneficiaries

Most life assurance policyholders haven’t read their trust deed, they’ve simply signed a document their financial adviser handed them and asked no questions. Here’s a little secret…most financial advisers haven’t read them either. A generic life trust deed when it is completed is seen as a post-sale administrative activity, when in fact it’s as important as setting up the life policy itself.

If you get a chance to read your life office trust deed, you’ll find your ex-wife or ex-husband as a potential beneficiary.

Scenario 1

Imagine a situation where you’ve passed away and your ex is still listed as a trustee and a beneficiary – want to take a guess who they’re likely to appoint the trust assets to on your death? Probably not to the new spouse. In any case, why take the chance?

It’s not just your ex-spouse listed as a beneficiary too, it often includes your children’s and even grandchildren’s ex-spouse too.

Scenario 2

You’re a parent and you’d like to settle a £300,000 life policy / bond into trust. You use the generic life office trust deed. You appoint yourself and your daughter as the trustees. You don’t like your son-in-law, and you’re looking forward to the day he becomes the outlaw as he’s not deserving of your daughter. She just can’t see it.

Anyway…unfortunately, you’ve now passed away and £300,000 is settled into the trust. But your daughter has also unfortunately now passed away too. But her will appointed her husband as the executor of her estate. As we’ve also got a trusteeless trust, the law says the executor of the last trustee to die has the right to appoint a new trustee. He then appoints himself. And remember he’s also listed as a beneficiary. The very scenario you had intended to protect against has now played out.    

You can probably imagine many more scenarios of unintended consequences of such an arrangement.

  1. Shorter trust period

The whole point of a trust is to protect assets against third party threats such as divorce settlement claims, creditor claims, generational inheritance tax and of course irresponsible children. Trusts have a statutory limit of up to 125 years, but many life office trusts last for a lot less.

Depending on the wording it could be two years from the date of the policyholder’s death or seventy-nine years from the date the trust deed was signed. Now let’s say you sign the said trust deed in 2008, and it’s now 2018 – your trust has only sixty-nine years remaining. By the time you die there could only be thirty years remaining, which could be just enough to protect only one generation if that!

Remember life office trusts were designed to simply bypass probate and so avoid inheritance tax, they are not effective for intergenerational planning.

  1. Putting more than £325,000 into trust

Trusts incur their own tax charges, notably a 6% charge every ten years on a balance above £325,000. That’s ten years from the date the trust deed was signed. No need to panic just yet – as in the case of life assurance trusts, the trust isn’t populated while the policyholder is alive so 6% of nothing is still nothing.

However, let’s say you set up the trust in July 2008 and you died in January 2018 (and the fact that you’re a ghost reading this right now), the life office would have paid out into your trust in January and within six months your trust would be facing another ten year anniversary – but this time your trust is populated. Should your life policy proceeds have been £500,000, your trustees would have forked out £10,500 in periodical charges!

How do you resolve this situation? You often can, but it’s beyond the scope of this article, but for starters as a rule, if you need a life policy of more than £325,000, take multiple policies out as multiples of £250,000 and assign each one to their own bespoke trust, that way you’d allow for investment growth and also avoid the periodical charges.

Hope that helps.

Mohammad Uz-Zaman is a private client trust and estate planning consultant who holds accreditations across regulated financial advice and estate planning. He holds holds graduate and postgraduate qualifications and is also an associate member of the Society of Trusts Estate Practitioners (STEP).

If you’d like some advice about your circumstances, submit an enquiry via the form below or book a call via our Calendly widget.