Case Study – Patricia

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Patricia* is 71 and is Retired

Primary Goal

Patricia had a number of objectives now she is retired. One of these was a plan to leave a gift for her children whilst saving as much money on Inheritance tax as possible. In addition to this, she wanted to have a way of creating income to maintain her lifestyle and make life simpler.

Clients Background

Patricia had a house in London which was being rented out for £1500 per month gross (£1200 per month after tax). Despite having an agent manage this, it was taking up a lot of time and effort for her, especially at end of tenancy.

Patricia decided to sell the house – but still wanted the £1200 income she was used to.

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How Did We Help

Patricia was already a client and we had a financial plan in place, showing that she already had enough assets for her lifetime.

Therefore, Patricia did not need the full proceeds from the house sale. With this in mind, it was decided that after capital gains tax was paid, we allocated £200k to give a gift of £50k to each of her 4 children now.

We invested £300,000 into a Discounted Gift Trust held in an offshore investment bond. This provides her with a tax free income of £1250 per month for the next 20 years. By doing this prior to the cash gifts to the children, there is no inheritance tax payments needed now.

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Support Outcome

This immediately reduced the inheritance tax her children would have to pay by £65,000. Should Patricia live for 7 years, the overall inheritance tax bill will be reduced from £220,000 to £18,000, whilst giving her an additional £50 income per month without any time or effort needed from her.

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*name changed to respect confidentiality

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