How we work with clients

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. A main priority for them was to understand their current position, and the existing assets they held. James had several small pensions that he was also looking to consolidate.
• Investment income. Create a tax efficient income to cover their annual expenditure needs of £100,000. James and Maria wanted the flexibility to ensure they could meet their lifestyle costs but also access their investments for any ad hoc expenditure needs and future travel plans.
• Legacy planning. Their goal is to be able to support their children throughout their lifetime including gifting to help with property purchases in the future. They also would like to minimise any Inheritance Tax that would be liable on their estate in the event of their deaths.
• James and Maria also would like to support several charitable ventures that they are both involved with.

Our recommendations:

• We created a bespoke cash flow plan to demonstrate how their expenditure needs could be met from the proposed recommendations over their lifetimes.
• Set up tax efficient investments for James and Maria, including ISAs and pension plans to make use of their annual allowances each tax year.
• Consolidated James’ existing pension’s plans from previous employments.
• Invested their surplus cash split between a Joint General Investment Account and a Joint Offshore Bond.
• Established Junior ISAs for the three children with the purpose of building a tax efficient pot to contribute towards a property purchase. In addition set up Junior pensions for the children.
• 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.
• Our Law Team helped to set up wills for James and Maria. In addition to this, both Financial & Property and Health & Welfare Lasting Powers of Attorneys were created to ensure that in the event of loss of mental capacity they have both appointed a trusted individual who will be able to make these decisions on their behalf.
• They have also nominated to leave 10% of their net estate to Charity in their Will. This will have the effect of reducing their rate of Inheritance Tax from 40% to 36%.

Outcomes (to date):

• James and Maria gained an understanding of their financial affairs and clarity on how the business sale proceeds could support their goals. They also feel they now have the confidence to make financial decisions for their future.
• They have been able to take a tax efficient withdrawal from their Offshore Bond to cover their expenditure needs using the 5% tax deferred withdrawal facility.
• Utilised their ISA, pension and CGT allowances each tax year.
• James and Maria have peace on mind knowing that in the event of their death, the 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.