The Case of Mr & Mrs ‘Got-Too-Much’

John and Mary ‘Got-Too-Much’ were in their late 60’s and happily enjoying their retirement. And so they should! John had worked long and hard in a Company that he had helped to grow over many years. He had benefited from his share options. He had accumulated some real wealth. They had plenty of income in retirement; from his Final Salary pension, from some private pensions, interest from their savings and dividends from their shares and ISA’s. They already had a big ‘Number’. And they were enjoying it.

House-wise John and Mary were ’empty nesters’ and were about to downscale to smaller, more manageable property. Their three children had all moved on and their five bedroom house was now too big for them. They had found an apartment overlooking John’s golf club. Perfect. Their downscale in house would soon see £600,000 going from bricks and mortar into savings.

But what did all this mean? And what about Inheritance Tax?

So John was encouraged to meet with a Lifestyle Financial Planner by a golfing pal. First our Lifestyle Financial Planner spent some time getting to know John and Mary, to understand the facts about what they had accumulated; their capital position and their sources of income. Then he helped them to identify the cost of the lifestyle they wanted to continue to enjoy. He also got them to think about what else they might like to do in their lifetime in order to really enjoy their remaining years.

And then he ‘crunched their Number’.

This is what he found. Based on the conservative assumptions they had made, after allowing for inflation, and after allowing for the potential costs of long term nursing care, John and Mary would NEVER run out of money.

In fact John and Mary’s wealth would continue to increase, even after allowing for extra expenditure. But John and Mary had a big problem. A different kind of problem to most. Instead of John and Mary running out of money, John and Mary were on course to die with TOO MUCH!

Why’s that a problem?

Here’s why. Having paid tax throughout their lives, on everything they’d ever earned (income tax and NI), on pretty well everything they’d ever spent (VAT), more tax when John sold his shares (CGT), and tax every time they had moved house (Stamp Duty) In fact John and Mary were about to pay another slug of tax (£24,000 to be precise) when they downscaled their house. Tax. Tax. Tax!

But their biggest tax bill was lurking. Our Lifestyle Financial Planner helped John and Mary realise the size of the problem, and who was going to be the single, largest beneficiary of John and Mary’s hard earned estate. The Chancellor! If both John and Mary died now the Inheritance Tax bill was well over £1million. And it was going to get worse. But it didn’t have to be that way.

So our Lifestyle Financial Planner helped John and Mary work out just how much more they could afford to spend, and how much they could afford to pass on to their children NOW and over the next ten years without fear of them ever running out of money.

Our Lifestyle Financial Planner helped John and Mary create a ‘spending & gifting programme’ John and Mary are now on course to eliminate their Inheritance Tax liability, they are on course to manage their wealth to give them the life they want whilst gradually passing on wealth down to their children and grandchildren so the Chancellor does not benefit.

They can do this, because John and Mary now know and more importantly understand – their ‘Number’.