Adviser Go has a number of features that may be useful if you are modelling IHT planning advice for your clients, and this article is intended to briefly summarise these for you.
Where to add inherited nil rate band or Previous PETs - Carryover Assumptions
The Carryover assumptions section is found towards the bottom of the Dashboard screen, and can be used to add client specific tax information - which might include inherited nil rate band and main residence nil rate band from a deceased spouse, any previous PETs which have been made during the last 7 tax years preceding the start date of the plan and any previous CLTs which have been made during the last 14 tax years preceding the start date of the plan:
Setting the escalation rate on nil rate band - Plan settings
The software has the current Nil rate band and Main residence nil rate band hard coded into it. These are frozen until 2030 following the changes introduced in the 2024 Budget, but beyond that date are assumed to inflate - the default inflation rate in the standard version of the software is 4% pa but you can adjust this in Plan settings.
Note that the IHT Property Exemption Escalation rate escalates the threshold above which MRNRB is tapered out (the threshold for 23/24 being £2 million). The MRNRB is set at £175,000 for tax year 20/21 onwards and from 2030 will be escalated using CPI.
Default Inflation / Growth Rates - Main Residence Threshold Escalation (preference)
Estate plans - specifying how an estate should be distributed
The default in Voyant is to assume that on death, husband and wife leave everything to each other. If this is not the case, you can add an Estate plan by clicking the + button at bottom right of your Dashboard screen and clicking on Estate plans. The Estate Plan screen will show you the projected estate at the client's mortality, and you can then specify how much of the estate should go to Charity, the Spouse or Other, and alter the order in which these distributions are made. Clicking on the % field will enable you to toggle between a % or a Monetary amount.
If, for example, your client is planning to leave 10% (or more) of their estate to charity, you can click on the Charity section, amend the % of total estate, and the software will then know to adjust the overall IHT rate to 36%.
The Estate Plan screen now also enables you to designate specific assets to specific beneficiaries using the Asset Distribution tab at top left:
Investments qualifying for IHT relief (BPR/APR)
When inputting an investment using the Unwrapped or ISA types, you have the option to model on the input screen whether it would qualify for BPR, the date qualifying and the % qualifying, and whether it is an AIM.
If you are adding an EIS, a field to input the date at which it becomes qualifying for IHT relief will be available. Relief is granted by extending the nil rate band by the value of the qualifying investment at date of death and you would see this on the Legacy screen:
Trusts - how to add a trust to a plan
You can add an existing or new trust into your plan by clicking the + button at bottom right and selecting Investments. Under Type on the investments screen you will find a range of trusts. Depending on the type of trust you select, you will be able to enter the trust structure as either Bare or Discretionary. If you are entering a new trust, such as an Other Trust, set the wrapper up with a zero balance and then model the transfer of money into the trust using Transfers. The transfer will be recognised by the software as a PET iff you selected Bare trust or if it is a Discretionary trust, the transfer will be treated as a CLT.
If you have an existing trust in the plan, enter the trust and its existing balance on the Dashboard but use the Carryover Assumptions screen to record any PETs made in the past 7 years or CLTs made in the past 14 years. The software will then include these in the IHT calculations if you model early death, and will apply taper relief, where applicable, to reduce any IHT payable.
Protection policies - written in trust
If you are adding protection into the plan (Term assurance or Whole of Life) you can indicate that the policy is held in trust. You must then also ensure that you designate a beneficiary -if you do not designate a beneficiary/beneficiaries, the sum assured will fall back into the owner's estate on death.
If you look in Overview>Legacy you will see the Life Insurance, WOL plan, shown in this example case, and the effect that it has had on the total estate.
Whilst the software does not show the WOL plan meeting the cost of the IHT liability, the WOL plan provides the mechanism in which to pay the IHT liability for the beneficiaries.
Gifting using the Annual Exempt Gift allowance - Gifting Goals
When inputting Goals you will find a category called Gifting Goals. Use this input screen to enter gifts which represent the client using their annual exempt gift allowance. Ensure that you designate the beneficiary of the gift (usually this is a child, if you have named the children or grandchildren within your plan) or select Persons outside plan. Also ensure when setting the amount (for which you would usually enter £3,000 assuming you are modelling an individual's Annual Exempt gift) that you set the inflation rate to zero, since this allowance does not inflate. Set the timing over which the gift will be made.
Note that on the Carryover assumptions screen, if the client has not used their AEG allowance in the year prior to the plan start, you can enter £3000, so that you could make an AEG of £6000 in year 1 and then step the gift down to £3,000 from year 2 onwards.
Gifts out of income/normal expenditure
If your client is going to make gifts out of income, we suggest that you model these as a Basic expense or Goal, setting the priority to Luxury so that these gifts are funded after paying for the client's own personal expenditure which has been modelled as a basic/leisure expense or goal. In order for these gifts to be exempt you would have to demonstrate to HMRC that there was sufficient income to justify the level of gifting since their guidance states 'Gifts, even if made out of income, will not qualify for exemption if the transferor had to resort to capital to meet their normal living expenses'. The client may have sufficient income from eg a DB pension, or you might choose to model planned withdrawals from a pension to generate a stream of income.
Potentially Exempt Transfers
If you wish to model a lump sum gift which is a potentially exempt transfer, use Gifting Goals. Although the Amount box will show a frequency as Annually you can ignore this and use the Timing tab to ensure that the gift is only made once.
Overview>Legacy screen
The Overview>legacy screens enable you to see the position at Planned Legacy (ie your client's default mortality age), or if one or the other client were to die 'today', or if both clients were to die 'today' (note that 'today' is actually at the end of the first plan year, so asset values will have increased by one year's growth and any withdrawals, or gifts made during year one will have been accounted for. If you have made a PET during year 1 it will become a failed PET and will be factored back in. The elder client is assumed to die first.
The screen opens in the Simple view. The total IHT liability (if any) on second death is highlighted at the bottom of the screen.
To see a more detailed breakdown, click on the icon on the right hand side:
The first section is the Valuation Summary.
In the Estate column to the right hand side you will see the value of the deceased's investments/savings/pensions/property - if it is a jointly owned asset, such as the property in the screenshot below, only the value of the deceased's share will appear in the Estate column, whereas the full value of the asset at date of death is shown in the Total value column. Note that items which do not form part of the estate when calculating IHT ie pensions (if death occurs pre 2027), or investments/life assurance policies held in trust are shown to have a zero value in the Estate value column.
The second section on the Legacy screen is the Estate Distribution and Inheritance Tax: in this plan, the clients are married and David is leaving his full estate to his wife, Maria, so the assets within David's estate - are treated as Non-Taxable Distribution and are not liable for IHT.
If you were then to scroll down the screen to assess the position on second death, ie Maria's death, once again you would see the valuation summary.
Then the Estate Distribution and Inheritance Tax section shows the taxable distributions ie those which form part of the estate liable to IHT (in this case the value of the home) and other assets. The IHT nil rate band is calculated by projecting forwards the current IHT nil rate band, doubling that up if the first client to die did not use their IHT nil rate band, and adding on any Main residence nil rate band. If there were investments in the plan which qualify for BPR you would also see the nil rate band being extended to include these.
At the bottom of this section you will see Distributions outside the estate, if for example there was a trust in the plan.
The net worth after tax figure includes the value of the estate, less any IHT payable, plus the value of distributions outside of the estate.
You can use the Comparison view on the Legacy screen to compare the IHT position of one plan with another:
If you then expand the comparison view, you will see not only the differing amounts of tax, but also the total wealth, after tax, available to be passed on:
Insights - the Potential IHT Insight
You can use the IHT Insight to view the potential IHT liability for each year in the plan.
You can run a comparison to compare eg your Base plan with your 'after advice' scenario'. The red line represents the IHT liability in the plan you are working in, and the purple line represents the IHT liability in the comparison plan. You can hover over any year in the graph to see the projected value of the IHT liability.
Potential IHT Insight report
You can now select the IHT Insight in the reports section, when choosing elements to include in a printed report. This will print out the line graph showing the potential IHT (and if you have run a comparison will print out the chart showing the two lines which represent the IHT liability before and after advice,) and a page which indicates the total asset values at the end of each year in the plan and the potential IHT liability.