How we helped Mr. & Mrs. Edwards sell their business, eliminate IHT and enjoy retirement

Mr & Mrs Edwards (not their real name) were in their mid-fifties when we first met them. Their manufacturing business had been good to them over the years but now they quite liked the idea of retiring, but they had some important questions that they needed to answer, including:

Could they afford to retire?

Could they sell their business? If yes, how?

Would they then have enough income to live comfortably for the rest of their lives?

Having talked to them in detail about their situation, concerns and aspirations we could see that:

They didn’t understand how their pensions worked or what they could do with them.

They were unsure about the tax implications of their current arrangements and any decisions they made

• their affairs were somewhat disorganised
• they had an Inheritance Tax (IHT) liability of £1.5m
• they were unclear as to how much they would need to fund their retirement
• they needed income of £50,000 net of tax over and above what they were drawing from their business
• Mrs Client required clarity as to how much they could spend sensibly each year.

After running cashflow projections taking into account various strategies and tax scenarios, we:

• recommended that they simplify and consolidate their investments
  each develop an investment strategy in line with their attitude to risk and their objectives
• calculated the amount of money they were likely to need to fund their retirement expenditure and lifestyle
  how much money they could give away to reduce inheritance tax
• arranged for their Wills to be re-drafting using special trusts, which immediately reduced their likely inheritance tax bill by £110,000 .
• set up an insured trust, placing over £2m outside their estate, likely to result in a further reduction of inheritance tax
• began discussions with their fellow business director regarding a vendor financed management buyout.

The results so far:

• Their inheritance tax liability has been eliminated.
• They have a tax efficient income stream that matches their lifestyle.
• We have simplified the management of their investments and the investment reports they receive – Mr & Mrs Client now understood what they have.
• We have reduced the risk and reward characteristics of their investment portfolio and Mr & Mrs Client now understood that this means.
• They have peace of mind in knowing they and their children and grandchildren will benefit fully from the fruits of their labours.

30 June 2023

Important Information

The material in this article is for information only. The presentation is for UK residents only.  The presentation is the property of MKC Wealth Limited and should not be distributed without prior permission from this business. The information contained in this article is based on our interpretation of  HMRC legislation which is subject to change. The value of your investments and the income from them may go down as well as up and neither is guaranteed.  Changes in exchange rates may have an adverse effect on the value of an investment. Changes in interest rates may also impact the value of fixed income investments. The value of your investment may be impacted if the issuers of underlying fixed income holdings default, or market perceptions of their credit risk change. There are additional risks associated with investments in emerging or developing markets. Investors could get back less capital than they invested.  Past performance is not a reliable indicator of future results. MKC Wealth Ltd does not provide taxation advice.  Taxation advice is not regulated by the Financial Conduct Authority.