Sandra Daniells

Overview

Sandra owns a successful care home business which regularly has excess cash sitting dormant within the company account. She has owned investment properties for several years herself, but also recently inherited her late husband’s estate, also including a number of investment properties. With two sons, it was imperative for Sandra to find a solution for mitigating the Inheritance Tax her sons would otherwise be liable for. The key for Sandra was protecting both her own and her late husband’s legacy, for their children. TLPI explained how she could do this with a Family Investment Company.

Whilst Sandra already has previously purchased investment property, she is keen to continue with property investments in the most tax efficient manner possible, whilst also protecting existing assets for the benefit of her family.

The Situation and Goals

As protecting her late husband’s legacy was one of Sandra’s key priorities, she started her journey with general research into Inheritance Tax and how to reduce this liability. At this point, Sandra explains she “couldn’t find much information. I spoke to a few companies about mitigating Inheritance Tax, but they were not very useful. A couple suggested I take out life insurance, but the premiums versus the returns were far from favourable.”

Sandra had been investing in property for several years, meaning she was familiar with the asset class and understood it to be a profitable option. Additionally, with excess cash sitting unused in her limited company, she knew there could be a more effective use for these profits.

Sandra was looking for a solution that achieved three main goals:

• Protect her late husband’s legacy and her own for the benefit of their children
• Safeguard surplus company funds and invest them profitably, without creating excessive tax liabilities
• Expand investment opportunities to grow her personal wealth during her lifetime

After conducting extensive research, Sandra remained cautious: “I know that there are a lot of people out there looking to get your money. Over the years, I have had many calls from companies asking me to invest, but when you look them up, they do not even seem to have their own premises…” Sandra then approached TLPI, where she spoke to Jordan, one of the Senior Corporate Investment Consultants, about the Family Investment Company structure.

The Approach

TLPI’s aim is to understand an individual’s situation through an initial free consultation. This focuses on what the client is trying to achieve and how we can remove the pain points consuming their time, energy, and resources.

Following discussions with Jordan, it became clear that a Family Investment Company would be the ideal structure to help Sandra achieve her objectives. She could retain full control of her funds and assets, whilst continuing to invest, accumulate, and protect wealth. By naming her sons as beneficiaries, they became part of the Family Investment Company, thereby removing future Inheritance Tax liabilities.

Working with our clients, we aim to:

• Gain a thorough understanding of their personal and financial situation
• Apply specialist expertise across over one thousand tax benefits and subsidies available to company directors
• Provide clarity and understanding to enable informed decisions across all wealth assets and options
• Implement 360° strategies to mitigate tax liabilities effectively
• Deliver the control and flexibility required to leverage existing wealth to grow businesses and assets
• Free up time by consolidating business and personal financial planning into a single, cohesive strategy for tax optimisation and growth

Why?

The Family Investment Company is designed to protect family wealth from excessive Inheritance Tax charges by separating it from the estate and putting it in trust, which was exactly what Sandra was looking for. In addition, it facilitates moving the excess cash from her successful business into this ring-fenced environment. As a result, the Corporation Tax bill for her company is minimised and the threat of losing Business Property Relief (BPR) and paying a 40% HMRC bill is gone. 

Unlike a traditional trust, the Family Investment Company offers more flexibility and control over the funds and what to do with them. Using this pot, Sandra can also invest and grow her wealth. She was already relatively familiar with property as an investment option from previous experience with buying and owning property but added that “Jordan was great in explaining the other different HMRC compliant asset classes and types of investments that could be made using a FIC.” 

Who?

TLPI offer a free, no-obligation consultation to get the full picture of a client’s situation and provide them with their options. Each client receives their own dedicated consultant who takes the time to assess the client’s situation and advise on whether the structures that TLPI offer would be appropriate, and if so, how to best tailor them to the individual’s circumstances. 

Sandra and her accountant were next invited to attend a Zoom consultation of which she recalled “Jordan gave me the knowledge and information to decide if I felt comfortable with the product. He explained, “If the product is not right for you, we don’t pursue it,” which gave me a degree of confidence – he wasn’t pushy!” 

How?

Sandra used her excess company cash, which at the time was sitting dormant in her company, to start her Family Investment Company. TLPI are registered with HMRC to set up these structures on behalf of our clients. 

As a limited company director, Sandra was also eligible for a Small Self-Administered Scheme (SSAS) which she took out at the same time as her Family Investment Company. Combining the two innovative products creates the ultimate tax planning solution. The SSAS can receive profits from the Family Investment Company without facing tax penalties, among other benefits of integrating the two. 

The Result

Sandra has started using her Family Investment Company to make further property investments. She recently purchased a holiday let in the Isle of Wight which now earns her income as a sub-let, but can also be used for her own stays as and when she chooses. 

Most recently, Sandra explored the option of hands-off property investment. This can include loans to developers or other less time consuming and complex ways of leveraging the knowledge of those with more experience. Typically, this form of investment offers fixed returns over a set number of years. 

Whilst property is the asset class Sandra is most familiar with, having had previous property investment experience, she is also open to other investment options going forward and is learning about the choices available 
to her. 

The investment capabilities of the FIC are certainly an attractive factor, however, as mentioned, Sandra’s priority was mitigating Inheritance Tax for her sons. Through the FIC, Sandra has peace of mind that her assets and wealth are held outside her estate, thus free from Inheritance Tax for her sons. As beneficiaries of the FIC, their interests are protected should the worst happen. Going forward, Sandra hopes to also integrate her husband’s investment property into the family tax planning strategy. 

Summary

For those in a similar position, especially those looking to avoid a hefty Inheritance Tax bill for their families, Sandra recommends that the Family 
Investment Company is well worth learning about: “My accountant didn’t know about this product, so it is worth doing the research, and speaking to people like TLPI if you have questions. Good advice saves you a lot of money in the long run!” 

Jordan suggested Sandra invite her accountant to join the Zoom meeting to save her time explaining the product to him and allowing him to ask his own questions. It is paramount that the client is comfortable with the strategy and fully understands the products before making the decision as to whether or not it will suit their personal financial situation. 

The Family Investment Company can be used as a multi-generational product – protecting family wealth for future generations. As part of Sandra’s Family Investment Company, her sons have learned of the options that this product offers to protect their own legacies, should they choose to. 

Thank you to Sandra for sharing her Family Investment Company story. At TLPI our consultants are experienced in property, investment strategy and pensions. We are registered with HMRC to set up Family Investment Companies and SSAS pensions. Each of our clients’ situations are different and require bespoke approaches to achieve the best outcome. Our aim is always to understand your personal situation and provide advice and support that fits around your aims and goals. The product has to be a fit for your own situation and so knowledge is key to choosing a tax plan and strategy that suits you and your family. 

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