THE SCENARIO

Mr and Mrs Taylor, both age 75, approached John Lamb as they had talked to their investment manager who suggested John lamb might be able to help. They were living in a house in the Home Counties worth £3 million with investments of £1.5 million which were providing their income. Their only son had 2 young children and although he had income which was sufficient to cover mortgage payments and other household expenses, both grandchildren were attending private schools and funds were being stretched.

Mr and Mrs Taylor were also concerned about inheritance tax and understood the benefit of gifting but did not feel they wanted to gift from their portfolio as they relied on that for income.

OUR SOLUTION

Wanting to help their son, Mr and Mrs Taylor decided to explore their options on how to provide school fee support for their grandchildren without impacting their current standard of living. 

After discussions, we recommended a Lifetime Mortgage of £500,000 which enabled them to place the money into two trusts to provide for their grandchildren’s school fees. Not only did this allow Mr and Mrs Taylor to provide for their grandchildren’s’ education it also took £500,000 out of the value of their estate with potentially £200,000 of IHT saved provided they survive for 7 years. The trusts remained under the grandparents’ control as they were appointed as trustees and they asked their existing investment manager to invest the funds until needed. The income and any capital gain were taxed on the grandchildren and effectively were tax free.