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Financial Advice | Financial Planning | Investing | Private Equity
Wednesday, September 07, 2022
Property Portfolio Value
Total amount of tax liability mitigated
Ahmed is a 55-year-old UAE resident who owns a Private Investment Company (PIC) structure with a £9 million property portfolio. His PIC owns this portfolio outright with no outstanding mortgage.
One of the properties is used for himself and his family during the summer months, however, the rest are rented and accumulate rental income throughout the year.
Ahmed was increasingly aware that his portfolio would likely be subject to UK Inheritance Taxes (IHT) at a rate of 40% upon his death. As a result, his potential liability is now £3,470,000 – the result of £9 million minus £325,000 (Nil Rate Band) x 40%. In addition to this, he will likely see his tax grow as the value of the property increases over time.
Working in collaboration with Ahmed’s lawyer, family office, and adviser, we recommended that he secured a Whole of Life contract with a sum assured of £4 million to cover the potential UK Tax liability upon his passing. He was to name his wife and children as the beneficiaries to provide them with the required liquidity to meet the tax liability as well as protect the family’s wealth and assets.
To meet the cash flow requirements, the policy was structured as a 10-pay premium payment term. Since the client was in good health, he received a preferred underwriting offer with an annual premium of £150,000, while the 4% rental yield from his property portfolio was more than sufficient to fund the ongoing policy premiums.
Alongside all this, our team took the opportunity to further discuss Ahmed’s retirement plan as he was concerned about how he would upkeep his family’s lifestyle after his retirement.
To appease his concerns, our wealth managers took the time to reassess his long-term financial and investment strategy, paying particular attention to its tax efficiency.
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