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case study 1

Case Study One
Securing income and avoiding
Inheritance Tax (IHT) for Rose
and William

IHT and wills

Rose and William are in their 70s and have been married for over 50 years.  A couple of years ago, William was diagnosed with dementia, which was a difficult time for the family, and of course especially hard for Rose.  William now lives in a nearby nursing home, where he receives the care he needs and where Rose is able to enjoy spending time with him. These changes had taken their toll on Rose, and she became increasingly concerned about managing the finances. She came to us for help to ensure everything was in place should the worse happen.


Securing income in later life

Both Rose and William receive state and company pensions, but Rose was concerned that if William were to die before her, her income would fall below the level she needs to pay her everyday living expenses, leaving her with a shortfall of over £350 every month. 


Rose, along with her son George, jointly act as William’s Power of Attorney.  They decided that it would be best for Rose to sell the family home and move into a retirement flat, which would be easier for Rose to take care of.  With £200,000 available from the proceeds of selling the family home, Rose asked us to help invest the money to provide an income for her in the future, when required. 


We identified that if William were to die before Rose, she would require around £13,000 a year to cover the lost income which she currently receives from William’s pension.  Rose and William also had a few ISAs and Investment Bonds, which Rose wanted to review to make sure her money was invested in the right way. She was keen to keep her investments together, to make it easier to keep track of everything.  


Avoiding IHT

Rose was also aware that if she or William were to die, they would leave each other with an estate worth just over £600,000, which would be close to the nil rate band of £650,000.  This concerned Rose, as she and William had always wanted to make sure their children, George and Helen, would benefit from any inheritance they would receive. Rose gave us the challenge of finding a way to ensure that her children weren’t faced with any unnecessary inheritance tax problems. 


The solution

After spending time searching what was available, we found a suitable Investment Bond, where the majority of Rose and William’s funds were subsequently invested.  We recommended that this Investment Bond was placed in a Loan Trust, with George and Helen as trustees and beneficiaries of the trust. This solution enables Rose to have access to the money when she needs it.  By placing it into a Loan Trust, any capital growth will be earmarked for the beneficiaries of the trust.  This means any growth would fall outside of Rose’s estate and would therefore be free from inheritance tax (IHT). 






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