Case Study - Investment Planning

This case study relates to clients who were downsizing, however, this type of planning could also be appropriate if you have received an inheritance, are selling land, or are selling an investment property and you wish to invest the proceeds for the medium to long-term i.e. a minimum of 5-10 years.

A retired couple were selling their home for £750,000 and were buying another for £450,000. They wanted to spend around £50,000 of the proceeds on their new home and to fund the purchase of a new car. They also wanted to keep at least £75,000 in accessible deposit-based investments as an ‘emergency’ fund. Their total net income was around £20,000 per annum and their annual expenditure was around £16,000 per annum, meaning they didn’t require any additional income from their investments immediately.

However, they wanted to increase their spending whilst they were fit and able to do so, and were also concerned in case either of them needed nursing care in the future. They wanted to invest their money for growth initially, but in a way that would allow for additional income to be taken in the future if they needed it. They were relatively cautious investors, who wanted a diversified investment portfolio overall, which provided greater growth potential and tax efficiency than deposit-based investments over the medium to long-term.

Their children would ultimately be the main beneficiaries of their estate, on which there would be a potential Inheritance Tax (IHT) liability of around £300,000. Although they were keen to reduce their potential IHT liability over time, their first priority, quite rightly, was to ensure that they had sufficient capital and income for the rest of their lives and they did not want to make any outright gifts at this time.

We arranged for £175,000 to be invested within a diverse, tax efficient portfolio which offered exposure to various asset classes within their overall risk profile. We also considered the most appropriate types of investments that would continue to match their objectives, whilst taking into account their likely tax position now and in the future. This meant that more of the growth-orientated investments were invested for Mr to ensure that his taxable income remained below the threshold at which he would have started to lose his Age-Related Allowance. We also meet once a year to discuss the performance of the portfolio and make maximum use of each of their ISA allowances, which over time will increase their non-taxable income.



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