Advisers forecast boom in inheritance tax advice

18th May 2017
"About three-quarters (77%) of advisers have seen a rise in clients with final salary schemes asking about IHT planning with 59% reporting significant increases."

Financial advisers are forecasting a boom in demand for inheritance tax advice and looking to strengthen business partnerships with lawyers to help them cope, according to research from Prudential.

69% of advisers expect demand from clients for advice on IHT planning to grow over the next 12 months with 37% forecasting a significant increase.
But 17% of advisers admit that, due to regulatory changes, they are not sufficiently confident in advising on IHT issues and want to develop links with legal firms and other specialists. About 35% of advisers say they are considering strengthening links with lawyers while 22% say they are already working with legal firms.

Close to 60% of advisers say part of the increase in demand is being driven by new IHT rules that came into effect in April 2017. The rules comprise an additional £100,000 per person residence nil-rate band. This limit will increase each year and complements the standard nil rate band to provide a potential £1 million IHT allowance for a couple in 2020/21.

Increased access to pension savings as a result of Pension Freedoms and the ability to leave pension wealth to family as well as rising property prices are also major factors.

Paul Harrison, Head of Business Consultancy at Prudential, said: “Rising property and pension wealth are making it increasingly important for advisers to be able to help clients with specialist advice on IHT planning and demand for advice is booming.

“However, providing that advice is becoming more complex with changes to pension rules as well as IHT limits, and advisers are absolutely correct to work with other specialists to ensure that clients are receiving the best possible support.

“Clients with final salary schemes who are seeking to take advantage of the flexibility of Pension Freedoms are a major source of IHT advice enquiries, advisers say. About three-quarters (77%) of advisers have seen a rise in clients with final salary schemes asking about IHT planning with 59% reporting significant increases.

“One specialist area that is driving demand for IHT advice is enquiries about using trusts – more than half (52%) of advisers say they have seen a rise in enquiries about trusts for IHT planning.”

Kelly Greig, Partner at Irwin Mitchell Private Wealth, added: “With the introduction of the Residence Nil Rate Band, large number of clients with second properties and increasing complexity of Inheritance Tax mitigation, it is not just consumers who are seeking expert legal advice but increasingly financial advisers who are turning to lawyers to help with their clients’ needs.

“Modern families are also becoming more complex with multiple marriages and cohabitation more common. This makes wills and trusts more complicated and estate planning, which should integrate legal, tax and financial planning, is often best served when financial advisers and legal/tax planning advisers work together.

“Financial advisers who work closely with lawyers can ensure that their clients and families do not face a legal or tax problem in future, and that their clients’ families benefit from an inheritance as intended.”

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