case studies
Below are some examples of financial solutions from CJ Hannan.
We work with a wide variety of clients and are confident we will be able to assist you with your financial affairs.
Tom is 59 and a Widow. He has two adult children, Alice and George.
Alice is recently divorced and requires some financial support.
George is married, but in an uncertain relationship. He is wealthy and has his own children.
Tom’s Will leaves his assets to his children in equal shares.
Financial Situation
The primary residence is valued at £600,000 with no mortgage
Tom has total investments of £250,000
Issues
Tom is concerned about IHT. He wishes to gift £150,000 to Alice but is concerned that any new partner may have access to this gift.
Solution
Tom should establish a Beneficiary Protection Trust (BPT) with a Trust for each child.
On his death, the assets would be directed into the family controlled Trust, where they would be protected from future social impacts such as divorce and bankruptcy.
The assets within the Trust can be used to make absolute gifts, invested to provide an income, or be used to provide loans out of the Trust.
The BPT is available for lifetime use, and can be used to make the £150,000 gift to Alice, whilst offering protection from any new partner.
The BPT also mitigates IHT for future generations.
Andrew Davies is 50
He is a UK resident and a higher rate taxpayer.
He is not currently making use of his CGT exemption.
Financial Situation
He has £70,000 in a Unit Trust – the original investment was £40,000
He is not currently using his ISA allowance
Issues
Andrew has made a gain of £30,000 on his Unit Trust. If he fully encashed this, he would be liable to CGT of 20% on the gain, which would mean a CGT bill of £3,540, taking into account the annual CGT allowance of £12,300.
Solution
Andrew should encash units from his Unit Trust up to his CGT allowance annually (currently £12,300 in the 2021/22 tax year). This should be invested in an ISA, up to the annual allowance (currently £20,000 in the 2021/22 tax year).
Funds within the ISA will grow free of income and capital gains tax. This will slowly move Andrew’s capital into a tax-efficient environment. He can then receive a tax-free income from the ISA when he requires this in the future.
Janice has no protection on her pension funds.
On 5th April 2016 her SIPP was valued at £1.25 million.
She expects to take benefits in 2023/24
Issues
The Lifetime Allowance is currently £1,073,100, and it will remain at this level until at least 2025/26.
As Janice’s pension savings will be in excess of this amount, she will face a Lifetime Allowance Tax Charge on the excess.
The tax charge will be 55% if the excess is taken as a lump sum, or 25% if it is taken as income.
Solution
Janice can still apply for Fixed Protection 2016 which will fix her Lifetime Allowance at £1.25 million. There isn’t currently a deadline to apply for this protection, however, Janice must not have made any further pension contributions after 5th April 2016. If she has, she will not be entitled to Fixed Protection.
Alternatively, Janice can apply for Individual Protection 2016. This will give Janice a personalised Lifetime Allowance based on the value of her pension funds on 5th April 2016. Janice will still be able to make pension contributions.
There is not currently a deadline to apply for Individual Protection 2016.
Andrew Davies is 50
He is a UK resident and a higher rate taxpayer.
He is not currently making use of his CGT exemption.
 Financial Situation
He has £70,000 in a Unit Trust – the original investment was £40,000
He is not currently using his ISA allowance
 Issues
Andrew has made a gain of £30,000 on his Unit Trust. If he fully encashed this, he would be liable to CGT of 20% on the gain, which would mean a CGT bill of £3,540, taking into account the annual CGT allowance of £12,300.
Solution
Andrew should encash units from his Unit Trust up to his CGT allowance annually (currently £12,300 in the 2022/23 tax year).
This should be invested in an ISA, up to the annual allowance (currently £20,000 in the 2022/23 tax year).
Funds within the ISA will grow free of income and capital gains tax.
This will slowly move Andrew’s capital into a tax-efficient environment. He can then receive a tax-free income from the ISA when he requires this in the future.
