Advising a UK-based entrepreneur on investments and structuring following a business sale

James is in his late 40s, married to Maria and they have three young children. James has recently received net proceeds of £8 million after he and his business partner sold their company.

He has earmarked £800k of this to repay his existing mortgage. James approached Stonehage Fleming as he wanted advice on how to invest and structure the remaining cash on deposit. The aim of the invested funds is to provide an income for James and his family to fund their expenditure needs going forward and to ensure his children are supported.

Having previously used his savings and reinvested profits back into the business, James initially found the level of liquid wealth overwhelming having little prior investment experience.

James and Maria’s goals:

  • To become financially organised and gain a better understanding of current position and existing assets
  • Create a tax efficient income to cover their annual expenditure needs of £100,000
  • Legacy planning to support their children throughout their lifetime; including gifting to aid future property purchases and minimise any Inheritance Tax liable on their estate
  • Philanthropy through support of charitable ventures already identified

Our recommendations:

  • Create a bespoke cash flow plan to demonstrate how their lifetime expenditure needs could be met
  • Set up tax efficient investments for James and Maria, including ISAs and pension plans to make use of annual allowances
  • Consolidated existing pensions
  • Invest surplus cash split between a Joint General Investment Account and a Joint Offshore Bonds
  • Establish Junior ISAs for children; building a tax efficient pot to contribute towards future property purchase and set-up Junior pensions
  • Set up a Whole of Life assurance policy on a Joint Life Second Death basis for the benefit of the children as a means to cover the potential Inheritance Tax Liability and remove the burden from their children.
  • Instruct Stonehage Fleming Law Team to set-up wills for James and Maria as well as both Financial & Property and Health & Welfare Lasting Powers of Attorneys
  • They have also nominated to leave 10% of their net estate to Charity in their Will. Resulting in an Inheritance Tax reduction rate from 40% to 36%

Outcomes (to date):

  • Confidence and clarity on current and future business decisions which support the family long-term goals
  • Tax efficient withdrawal from Offshore Bond to cover expenditure needs using the 5% tax deferred withdrawal facility
  • Utilisation of annual ISA, pension and CGT allowances
  • Peace of mind knowing that their children will face a much reduced Inheritance Tax Liability
  • We have continued to update their cash flow plan as naturally their circumstances change over time. We have included modelling in the timing of potential future gifts to their children

Disclaimer: Please note, all case studies have been carefully anonymised. Although scenarios are based on real life events they have been fictionalised and are an amalgamation of client experiences. All names, locations and occupations have been replaced with pseudonyms.


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