Estate planning a 'huge' advice opportunity as stealth taxes bite

Estate planning is the biggest advice opportunity of the moment and is a "threat to your business if you are not doing it", according to Octopus Investments.

Speaking at International Investment's sister title Professional Adviser's PA360 North event on 8 December, executive business growth manager Nick Bird told adviser delegates estate planning was an area where planners could make a big difference to higher-value clients.

He explained many diligent and careful savers could be caught out by inheritance tax (IHT) as frozen allowances - which he described as "stealth taxes" - would be in place until at least 2026.

"Estate planning is one planning area that will make a big difference. This is the biggest area for planners.

"Estate planning is a huge planning opportunity - or a threat to your business if you are not doing it," said Bird.

Chancellor Rishi Sunak froze most tax allowances, including IHT and the pensions lifetime allowance, in this year's Spring Budget meaning many more people are set to be caught by the limits. 

The nil-rate band (NRB) will continue at £325,000, the residence nil-rate band (RNRB) will remain at £175,000, and the RNRB taper threshold continues at £2m.

That means a single person maximising the nil rate bands, can pass on up to £500,000 with no IHT.  A married couple or those in a civil partnership can pass on up to £1m with no IHT.

Bird added: "So many people have been pushed into this. Rising house prices are to blame. Property pushes people to the precipice of planning.

"£1m can be wiped out quite quickly by a house."

Bird went on to say that the advice market as a whole had "done well" during the pandemic with more people actively seeking advice due to a greater willingness to address their own mortality.

"You need to talk about this," he said. "Understanding the allowances, trusts, whole of life, all these things are important.

"People who get caught by IHT are careful, thoughtful savers. Education is massively important from the adviser community. People need to have their eyes wide open."