The Inheritance Tax Guide

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From Cocoon Wealth

The Inheritance Tax Guide

“ In this world nothing can be said to

be certain, except death and taxes.”

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Death and Taxes: Keeping it Simple 3

Do you need to worry about IHT 6

Simple steps to reduce IHT

Will Planning 8

Lifetime Giving 11

Trusts for IHT Planning 13

Death and Taxes: Keeping it Simple

Is IHT as it appears, or just for the

really wealthy?

IHT is only payable if your Estate is valued over the current IHT-free threshold (£325,000 until 2018). IHT is payable at a rate of 40% on the amount over this threshold. Anything below this threshold falls within the Nil Rate Band (NRB) and no IHT is payable.

IHT was originally meant to re-distribute wealth from the rich back to the State, but as the NRB threshold has not kept pace with house price inflation, it is not just the rich that are getting caught.

Most individuals with an average home will have an Estate worth more than £325,000 and so will be required to pay IHT at a rate of 40% on anything above that level.

The average house price in the UK is increasing each year, and according to the Office for National Statistics, the current UK average is £272,000; in London that average is now over £500,000, meaning more and more people will find the value of their Estate extending beyond the NRB threshold just because their home has increased in value in recent years.

IHT is one of the few taxes that people can legitimately reduce by planning ahead and is why it has been labelled by some advisers as a

‘voluntary tax’.

So if you don’t think about this problem, it means your loved ones might get a lot less than you intended.

Inheritance Tax (IHT) is a tax on the money or assets that are inherited after a

person dies or on some gifts that are made before someone dies. When an

individual dies, the house, money, investments and other assets that they leave

behind (less any outstanding debts) are known as their ‘Estate’. This Estate is usually

left in a Will to the friends and family of the person who has died, and is their

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0 100000 200000 300000 400000 500000 600000 2014 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 London United Kingdom

Average House Prices in the UK and London since 1986

Av

erage House Price (£)

What about the legally married?

Married couples and civil partners are able to give their assets and possessions to each other tax-free during their lives and on death, although there can be restrictions if the receiving partner is foreign. Also, if the NRB (£325,000) is not used at all by the first to die, this allowance will pass to the surviving partner, increasing their NRB to £650,000 upon their death. Likewise if some of the NRB has been used by the first to die, any unused balance of the NRB can be transferred to the surviving spouse.

Example

Mrs Grace Higgins, a widow, dies leaving an Estate (home and investments) of £500,000. Her husband who predeceased her used his NRB so there was no balance to transfer to Grace. Subtracting the NRB means £500,000 - £325,000 = £175,000 chargeable to IHT

(Mrs Higgins’ taxable Estate) Mrs Higgins Estate will be taxed at a rate of 40% = £70,000 IHT bill

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Leaving bequests to your favourite Charities

If you leave 10% or more of your Estate to charity, the rate of IHT payable is reduced to 36%.

So if you give £10,000 to charity under your Will and your remaining taxable Estate is £90,000, the tax payable at 36% is £32,400, meaning your net Estate for your friends and family is £57,600. Compare this to the situation where no gift is made and tax is payable at 40% on £100,000. In that case the friends and family would get £60,000. This means a charitable gift of £10,000 only costs £2,400 (£60,000 – £57,600).

Example:

Gifiting to Charity

Total Estate = £100,000 Gift to charity = (£10,000) Remaining estate = £90,000 Tax payable at 36% = (£32,400) Net Estate = £57,600

No gift

Total estate = £100,000 Tax payable at 40% = (£40,000) Net Estate = £60,000

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To calculate the potential IHT liability of your Estate on death, you will need to add up the value of everything you own in your name, or a share of anything owned jointly, including:

yYour house and any other properties you own in the UK and abroad

yAny savings or investments, including any foreign bank accounts or shares

yOther assets, including cars and personal belongings

yThe value of any life insurance policies in your name or pensions that include a lump sum payment on death

Then deduct any debts, such as an outstanding mortgage or loan, unpaid bills, and anything you want to leave to charity. You can also deduct the value of any gifts made on death that are exempt from IHT (see below for further details on what constitutes an exempt gift) and the reasonable costs of your funeral. If the number is greater than the current NRB of £325,000 then IHT will be payable, but the position will depend on your marital status.

Marital status

Single or Unmarried

For IHT purposes, singles and unmarried couples are treated the same; 40% IHT is due on the value of your Estate over £325,000. The position for unmarried couples in Scotland may offer additional rights, but these do not affect the IHT rules.

Married/civil partnership

If you transfer any part of your Estate to your spouse or civil partner, this will not be subject to tax, however IHT may still be chargeable when they die – see below the position for widows. Up to 40% IHT is due on the value of your Estate transferred to others (i.e. not to your spouse/civil partner) over the £325,000 NRB.

Widowed

The tax-free NRB amount available on your death depends on what your spouse or civil partner left to others when they died. If they left an Estate worth more than £325,000 to anyone other than you, they will have used up their NRB. However, if your partner left everything to you or left an Estate worth less than £325,000 to people other than you, they will not have used up all of their NRB, thus any unused amount can be combined with your own NRB (up to £650,000). Up to 40% IHT is due on the value of your Estate over your NRB when you die.

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Who Pays the IHT?

IHT is usually paid from the deceased’s Estate after all debts have been paid. Payment is usually due within six months after death, after which time interest starts accruing on any unpaid liability. Tax on certain types of assets, such as land and buildings, can be deferred and paid in installments over ten years. However, if the asset is sold before all the installments have been paid, the outstanding amount must be paid in full.

Remember, it is the people who receive lifetime gifts from you who pay the IHT or it is paid out of your Estate.

If you die within seven years of giving a gift, IHT will be payable by the person or people who received the gift. If they do not pay the tax due, the amount will come out of your Estate. There are strict rules in place that govern whether gifts are exempt from IHT – see below for further details on IHT-exempt and potentially exempt gifts.

Quick Succession Relief

Quick succession relief applies when someone who has inherited an asset from another dies within five years. The relief reduces the IHT due on the second death. There is a sliding scale of relief from 100% (if the second death occurs within one year of the original death) down to 20% (up to five years) but it only applies if IHT has been paid. Seek advice from your solicitor and your financial adviser if you think this applies to you.

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Simple steps to reduce IHT

1_{(Unbiased.co.uk, 2013)}

Will Planning

58% of UK adults don’t have a Will

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_.

For married couples and civil

partnerships, with or without children,

a Will can have a huge impact on

your IHT liability.

People who don’t consider making a Will or IHT planning before they die risk leaving an expensive bill for their loved ones rather than the assets or family heirlooms they intended.

“Inheritance Tax, is broadly speaking a

voluntary levy paid by those who distrust

their Heirs more than they dislike the

Inland Revenue.”

Roy Jenkins MP, 1986

It is said IHT is a “voluntary tax” and with the right financial planning, practically everyone with an IHT liability should be able to reduce it substantially and without significant risk.

When making a Will or undertaking other IHT arrangements, the risks that you must consider are: y Risk to the Giver (running out of assets)

y Risks to the receiver (irresponsibility with money) y Risks of the Investment (what is the

underlying investment - is it simple?) y Risks of Challenge by HMRC (is it

subject to DOTAS or the GAAR?)

There are a number of different IHT planning solutions available. Finding the right approach will depend on your individual circumstances and risk profile. Talking to a financial adviser will help, as they can explain the different options available and the risks associated with each.

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Making a Will

The first course of action (and often the simplest) when IHT planning is to leave assets in your Will to your spouse or civil partner. Such transfers or gifts made either during your lifetime or after your death will be exempt from IHT. As a result, the surviving partner will not have to face selling the “family silver” to pay the IHT bill and will have a double NRB allowance (worth up to £650,000) when they die. To write a legally binding Will you need to:

y Be 18 or over y Make it voluntarily y Be of sound mind y Make it in writing

y Sign it in the presence of 2 witnesses who are both over 18

y Have it signed by your 2 witnesses, in your presence

If you make any changes to your Will you must follow the same signing and witnessing process. Planning what assets to leave, and to whom, can be complicated, so it’s important to get professional advice from a solicitor, tax adviser or independent financial adviser. There is some useful basic information on the HMRC website (www.hmrc.gov.uk).

DIY Wills

You or your husband might be handy around the house but it is better to get advice on drafting your Will rather than writing or trying to write your own, because if it’s not done properly you could be treated as dying intestate (without a Will). You would therefore be adding to the £3 billion in IHT HMRC collected last year, needlessly!

Failing to leave a Will

If you don’t have a valid Will when you die (known as dying ‘intestate’) this can cause a lot of distress for the people left behind. Not only have they lost you, they may also lose treasured family assets because your Estate may not be passed on as you intended. There are fixed rules for who is entitled to share in your Estate if there is no Will or an invalid Will and they will probably come as a shock.

If you are unmarried or not in a civil partnership and have no close relatives, it is worth remembering that if you die intestate, it is the government who can end up with all your assets. So you should always make a Will, even if you just want to ensure that your Estate is left to your favourite charity, unless of course you believe the government of the day will make good use of the assets you leave them.

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Almost 2/3 of the people who die in the

UK die without a valid Will, which might

explain why the tax man collected over

£3 billion in IHT last year.

Post-death Wills

If all the family and friends who benefit under your Will agree, it is possible to change the terms of your Will after your death. This can help where your Will is out of date and changes in law mean your Will results in more tax being payable than needs to be. By entering into a Deed of Family Arrangement, the Will can be changed so that the changes take effect as if they were part of the original Will for IHT purposes. Although this is a useful safeguard, it is never a substitute for making a Will and making sure it is kept up to date. There are time limits for changing Wills this way and if you think it is something that might affect you, you should discuss the situation with your family and your legal advisers.

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Lifetime Giving

You may be able to reduce your potential IHT liability by simply giving your assets away by way of a gift. However, you need to think about the risks touched on above in relation to you as giver and for the receiver.

For example imagine you made a large gift to your daughter on the understanding that if anything changed in your circumstances that she would “see you all right” and shortly after the gift is made the nice young man she married turned out to be a complete opportunist, divorced her and took half the money.

Potentially Exempt Transfers

Most gifts you make will be classified as a Potentially Exempt Transfer (PET). IHT is not due when the gift is made, but if you die within seven years of making the gift, the recipient will be liable to pay IHT. After seven years, any gifts you make which are not exempt, will fall outside of your Estate for IHT purposes.

Taper Relief

The rate of IHT due reduces if you die between three and seven years after making the gift. Again there is a sliding scale whereby the IHT bill is reduced by between 20% - 80% depending on how many years you survive the gift.

Gifts with Reservation

A further risk would be a Gift with Reservation. For example if you gifted a house to your children but continue to live there without paying market rent,

IHT Exempt Gifts

y Annual Exemption

Up to £3,000 a year can be gifted without this being subject to IHT (the annual exemption). If you do not use your £3,000 annual exemption in one year, it can be carried over and added to the next year’s annual exemption, although you can only do this for one year.

y Small Gifts

You can make small gifts of up to £250 a year to any number of people (but not the same person). You cannot use your annual exemption and your small gift exemption on the same person in any one year.

These exemption limits have remained the same since Inheritance Tax was introduced in 1986 and are becoming less and less relevant as time goes on.

y Gifts to Family

Any gifts between spouses or civil partners are free from IHT.

Wedding gifts are considered separately and are free from IHT. If you have children you and your partner may each gift up to £5,000 per child, and grandparents can gift up to £2,500. You can gift up to £1,000 for anyone else.

Gifts made to children who are not

relatives remain exempt as long as they are in full-time education.

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y Regular gifts from after-tax income Regular gifts, such as a monthly payment on a life insurance premium, or gifts to a family member are exempt from IHT provided you can demonstrate that you are still able to maintain your standard of living.

y Gifts to exempt recipients

Gifts made to certain institutions such as charities, national museums, universities, the National Trust, and political parties are exempt from IHT.

Keeping records

It is best advice to keep records of all the gifts you make each year when you fill out your tax return. The record should show the date of the gift, the amount and who received it. If you are claiming it is exempt as a gift out of after tax income, ask your tax adviser to keep a record of your after-tax income for that year and to prepare a brief summary of your normal living expenses. This will greatly help the Executors of your Estate prove that the gifts are exempt when the time comes.

Gifts that you make while you are alive (whether they are IHT exempt or not) must be checked by the Executors of your Estate to make sure the correct IHT is paid. So, it would save professional fees the Executors have to pay and possibly IHT if the records are up to date and accurate.

Furthermore, all gifts left by a spouse or civil partner will be taken into account when calculating the tax-free allowance (NRB) on the surviving spouse or civil partner’s Estate, so it is important to keep a record of these.

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Trusts for IHT Planning

Trusts can be useful planning tools to ensure that your assets can be given to Beneficiaries in accordance with your wishes, and without incurring an IHT bill. For example, you may want to set up a Trust so that part of your Estate goes directly to your grandchildren when you die.

The Trust can be designed to make sure that

assets remain in place until your grandchildren reach 18 years old, for example, or when they

start university.

However, using Trusts is not without complications and there may still be other charges which

could reduce the efficacy of any IHT planning. There is an HMRC consultative document on the simplification of Trust taxation that may introduce changes in 2015.

There are several different types of Trust available, some examples are below.

Bare Trusts

With a Bare Trust, the Beneficiaries are entitled to all of the assets that are held within the Trust, beneficially they belong to them. It is the duty of the Trustees (the people appointed to manage the Trust) to manage the assets for the Beneficiaries and to transfer the assets when required. These types of Trust are most commonly used with insurance bond arrangements for “Discounted Gift Trusts” talked about below.

Interest in Possession Trusts

With an Interest in Possession Trust, the Beneficiary has an immediate and automatic right to the

income from the Trust as it arises. Usually a different Beneficiary will be entitled to the capital within the Trust at a future date.

Discretionary Trusts

With a Discretionary Trust, it is the Trustees who are the legal owners of the Trust’s assets. It is the duty of the Trustees to manage the Trust for the benefit of the Beneficiaries, with ‘discretion’ about how to use the Trust’s income and capital.

A Discretionary Trust may be set up to provide money for a future need that is not yet known or on certain conditions being met (for example, grandchildren). Some Trusts can start life as Interest in Possession Trusts and convert into full protective Discretionary Trusts in certain circumstances, in the case of bankruptcy, or irresponsible behaviour with money or divorce.

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Discounted Gift Trusts

A Discounted Gift Trust is usually a Bare Trust or a Discretionary Trust arrangement that is set up to look after an investment. By gifting an amount into the Trust, it allows your Beneficiaries to receive the capital within when you die, whilst you retain a right to income paid out by the investment, usually for the rest of your life. This can be a useful tool to ensure that your asset or investment is outside of your Estate for IHT purposes, but still gives you access to the income from the investment itself.

Loan Trusts

Similar in some ways to a Discounted Gift Trust, a Loan Trust allows you to make an interest free loan to a Trust, which is repayable on demand. Therefore, subject to how the Trustees invest the capital, you always have access to your original capital whether you choose to receive it as a lump sum or as regular payments.

Any part of the loan not repaid to you will form part of your Estate on death; however any growth on the investment within the Trust will broadly be exempt from tax.

With a Loan Trust, you have the flexibility to

determine who will benefit when and in what shares following your death.

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Benefits to YOU

y YOU save tax Quickly y YOU retain Control y YOU retain Access

y Whose responsibility is it to undertake these checks and how are they accountable for ensuring this happens?

With a diverse portfolio of investments this will involve administrative costs that will reduce the fund performance and will cost more the greater the number of investee companies involved. Alternatively you can purchase shares in a

company that is itself a trading company and qualifies for relief in its own right. This also has risks concerned with understanding the trade the company is carrying on and how it is managed. Tax reliefs depend on investee companies

maintaining their qualifying status, and the BPR rules could in theory change. While this is unlikely, you should consider how an investment manager will mitigate the risk of an investment losing its BPR status.

Before making a decision to invest in a BPR solution you should speak to a financial adviser and refer to the relevant product literature for full details of the risks to make sure you’re comfortable with them.

What are the benefits of BPR?

Unlike gifts and Trusts, which generally take seven years before they’re fully exempt from IHT, BPR-qualifying investments are IHT exempt after just two years (provided the investments are held at the time of death).

Unlike an outright gift, you retain control over your BPR investment, and can get your money back, if you need to. However, money taken out of the investment may not be shielded from IHT. Many BPR solutions allow you to take an income from your investment. Compared to a Discounted Gift Trust, Loan Trust or other “income” producing asset, a BPR investment will allow you to retain control over the entire asset and the full capital amount should be preserved on death, meaning more is available for your loved ones after you die. BPR investments are relatively simple. Generally there are no complex legal structures, and there may not be a requirement for client underwriting or medical surveys. This can be especially useful for the elderly and/or those in ill-health.

You save tax simply and quickly, retain control of and access to your money, receive income and your beneficiaries retain more of your estate.

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How Cocoon can help you

The Cocoon Green Energy Solar Fund is a UK solar energy investment opportunity designed to help reduce inheritance tax liabilities through shares in a company that qualifies for BPR. This means that your investment will receive a 100% exemption from IHT after just two years and could reduce the IHT payable on your Estate. The fund will also deliver income through a discretionary fund management service.

Investment Summary

An investment into Cocoon Green Energy Solar Fund gives you the opportunity to benefit from government-backed solar renewable projects. The Fund will seek to acquire one or more solar PV plants which will manufacture electricity. The electricity will be sold to an energy purchaser under a Power Purchase Agreement. The generation of electricity from renewable sources will enable receipt of government-backed index linked subsidies. Once a solar PV project is commissioned, a 20 year RPI linked Government backed revenue stream commences.

*_{RPI is the rolling 12 month average ONS published figure.}

Returns and Benefits

y Reduce or eliminate your exposure to inheritance tax

y Earn an inflation proofed return of RPI* + 2.5% annually, paid quarterly (this equals 5.00% p.a., based on July 2014 RPI) y Easy access to your investment (on

30 days notice) if you need it through a substantial liquidity reserve

y No fees or charges are ever deducted from your investment, unlike every other major provider of inheritance tax solutions

y The investment is extremely secure and low risk. Returns are underpinned by long term, Government guaranteed, inflation linked, subsidies and the sale of power in 10 + year contracts to major power companies y An investment into UK solar, a key element

of the UK’s energy pool and its clean energy future

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Do you want to be able to access your original

capital, fixed regular payments, or both?

Consider Cocoon Green Energy Solar Fund

*_{You can choose to make phased}

gifts to Beneficiaries after year 2, or regular gifts out of income

Do you want to be able to access

your money? Do you want your

Beneficiaries to receive the money now?

No Yes No* _Yes Both capital and income

Original capital Fixed regular _payments

All Some

Do you want to retain access to some of your

money or all of it?

Consider Whole of Life Cover Consider a Loan Trust Consider a Discounted Gift Trust

Do you want income and liquidity?

No Yes

Consider making an outright Gift

Which IHT Planning Solution

is Right for Me?

Nobody likes to contemplate their own death (or pay taxes!) but planning your financial affairs now will ensure that you are protecting your assets for your loved ones and not leaving them to deal with the burden of inheritance tax after you’re gone.

We understand the importance of making informed decisions when it comes to IHT planning, which is why we have produced this guide, along with some simple examples and a comparison sheet to help you consider all of your options.

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What is BPR?

BPR was introduced in 1976 by the UK government as a way to help with liquidity problems of major shareholders who died owning shares subject to Estate taxes.

If you invest in the shares of certain trading

companies, your investment will benefit from 100% relief from IHT, as long as you hold the shares for at least two years and still hold them when you die. This enables investors to save IHT without losing control of the investment and allows them to withdraw funds at any time.

Cocoon Green Energy Solar Fund

y Lower risk investment than other BPR offerings in the market due to its long term

Government-backed revenue streams and risk-mitigated trading strategy

y Offers liquidity should your circumstances change unexpectedly, allowing you to access your capital on a 30 day notice period

y Income yield of RPI + 2.5% per annum

Example

y An individual invests £1m into the Cocoon Green Energy Solar Fund

y After the individual has held the investment for 2 years, the shares qualify for Business Property Relief (100% IHT relief)

y The individual receives an inflation-proofed income yield of RPI + 2.5% per annum, paid quarterly

y The original £1m investment capital is preserved on death

y There are no charges, unlike setting up a Loan Trust or Discounted Gift Trust

Cocoon Green Energy Solar Fund

(BPR offering)

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IHT Exempt gifts

y Transfers between spouses

y Up to £3,000 can be gifted per year without being subject to IHT

y Marriage gifts of £5,000 per year for parents or £2,500 for grandparents

y Small gifts up to £250 to any number of people

Potentially Exempt gifts

y IHT-free on your death, providing you survive for 7 years from the date of making the gift

y Applies to gifts made in excess of the limits governing ‘exempt’ gifts

y There is no limit to the amount you can gift to someone by way of a potentially exempt gift

Pros

 Gifts made 7 years before you die sit outside of your Estate for IHT purposes

 There is no limit to the amount you can gift

Cons



You have no control or access to assets once gifted, as ownership passes entirely to the recipient



IHT will be payable if you die within 7 years of making a gift

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What is a Loan Trust?

y You make an interest free loan to a Trust, which is repayable on demand so (subject to how the Trustees invest the capital) you always have access to your original capital whether you choose to receive it as a lump sum(s) or regular payments.

y Any part of the loan not repaid to you will form part of your Estate on death; however any growth within the Trust will be taxed under the trust provisions at broadly 6% or will be exempt.

Example

y An individual makes an interest free loan of £1m to a Trust

y The outstanding amount of the loan will form part of the individual’s Estate, on which IHT will be chargeable

y The Trust invests the funds into say, a bond, with a 5% annual coupon (5% x £1m x 10 = £500k). This growth remains outside the Individual’s Estate for IHT purposes

y The individual opts to receive regular payments of 5% out of the Trust over the remaining 10 years of his life (5% x £1m x 10 = £500k)

y The amount the individual receives from the Trust will reduce the taxable element to their Estate

y At the individual’s death, there remains £1m in the Trust (original £1m plus growth of £500k, less payouts of £500k)

y Within the individual’s Estate, the outstanding loan amount is now £500k (original

£1m outstanding loan, less payments made to the individual of £500k)

y Thus there is tax payable on both the individual’s Estate (IHT @ 40%) and the growth of Trust funds (income tax @ 45%)

Outstanding Loan forming

part of Estate £(1,000,000) Plus payouts to Individual £500,000 Value of Estate chargeable

to IHT £500,000

IHT £(200,000)

Amount left to

Beneficiaries £300,000

Original amount loaned to Trust

£1,000,000 Growth of Trust fund £500,000 Less payouts to Individual £(500,000) Income Tax on £500K growth £(225,000) Less repayment of

outstanding loan

£(500,000) Amount left to Beneficiaries £275,000

Combined amount left to Beneficiaries

= £575,000

Loan Trusts

Individual’s Estate

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What is a Discounted Gift Trust?

y A Discounted Gift Trust allows you to take an

“income” from the Trust but the remaining capital is held for your friends and family. y The right to future payments from the

arrangement reduces the value of the asset given to the Trustees to operate the plan for IHT purposes.

y You have the flexibility with some trusts (but not all) to determine who will benefit, when and in what shares following your death. You are able to change the Beneficiaries with Discretionary Trust-based arrangements but not with Bare Trust arrangements. y Depending on your age and health you will

receive an immediate discount for IHT purposes representing the value of your right to the payments from the Trustees. The remainder or net value of the asset transferred to the Trustees will become exempt from IHT after 7 years.

Example

y An individual gifts £1m to a Trust (therefore the funds all sit outside of the individual’s Estate for IHT purposes) y The Trust invests the cash into say,

a bond, with a 5% annual coupon (5% x £1m x 10 = £500k)

y The individual retains a right to regular payments of 5% out of the Trust over the remaining 10 years of his life (5% x £1m x 10 = £500k). It is important to note that for tax purposes these payments are treated as a return of capital, and are not subject to tax in the hands of the individual y At the individual’s death, there remains

£1m in the Trust (original £1m plus growth of £500k, less payouts of £500k)

y There is nothing remaining within the individual’s estate for IHT purposes y Income tax is payable on the growth

within the Trust @ 45%

Amount Gifted to Trust £1,000,000 Growth of Trust Fund £500,000 Less payments to Individual £(500,000) Income Tax on £500K growth £(225,000)

Discounted Gift Trusts

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What is Whole of Life Cover?

y This is a regular premium life assurance policy which will pay a lump sum on your death

depending on your age and health. Some view the policies as another investment, however, this is an investment you will never actually benefit from.

y The Trust is used to ensure your friends and family get the policy benefits without the potential IHT payable on the death benefit itself.

Issues to be aware of

y Unlike term assurance policies that have an end date, whole of life policies will last as long as you do and therefore so will the liability to pay the premiums. The lump sum on death can be set to pay all or part of your IHT liability

y The policy is normally written in Trust and the annual premiums claimed as exempt from IHT as a regular gift out of income. There is a risk that if your income falls in retirement that the premium payments may not be payable out of surplus income

Another option...

y Using income from a Cocoon Green Energy Solar Fund investment to fund the premium payments under a whole of life contract can be tax effective and reduces the worry of funding the premium each year

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Comparison of IHT Planning Options

CGE Solar Fund Loan Trust Discounted Gift Trust

Income/payments to

Individual during lifetime RPI + 2.5% 5% 5%

Assets within the Individual’s

Estate at Death – 500,000 –

Assets outside the Individual’s

Estate at Death 1,000,000 500,000 1,000,000

Income Tax at surrender1 _– _(225,000) _(225,000)

Inheritance Tax – (200,000) –

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For further information please contact:

Cocoon Wealth LLP

10 Old Burlington Street, London, W1S 3AG

T: +44 (0)207 478 2800 | F: +44 (0)207 478 2801

E: info@cocoonwealth.com | W: cocoonwealth.com

This document relates to the Cocoon Green Energy Solar Fund and is issued and approved by Cocoon Investments Limited.

(“CIL”) which is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Any decision in connection with an investment in a Company should therefore be made only on the basis of information contained in this document issued in connection with the offer and not on this document. Nothing in this document is intended to constitute or form part of any offer for sale or solicitation of any offer to buy or subscribe for a Company.

If you are in any doubt about the content of the document, and/or any action you should take, you are strongly recommended to seek advice immediately from an independent financial adviser authorised under the Financial Services and Markets Act 2000 (FiSMA) who specialises in advising on opportunities of this nature. Nothing in this document constitutes investment, tax, legal or other advice by CIL. An investment in a Company will not be suitable for all recipients of this document or the document and your attention is drawn to the section headed “Risk Factors” in the document.

All statements of opinion or belief contained in this document and all views expressed, statements made and all projections and forecasts regarding future events or the anticipated future performance of a Company represent CIL own assessment and interpretation of information available to them as at the date of the document. No representation is made, or assurance given, that such views, statements, projections, forecasts or anticipated future performance are correct, attainable or complete or that the objectives of a Company will be achieved. The views, statements, projections, forecasts and anticipated future performance are based upon various assumptions and estimates which involve significant judgment and analysis and which are subject to uncertainties and contingencies; actual results could differ materially from those set forth in such projections, views, statements, forecasts and anticipated future performance. Prospective investors must determine for themselves what reliance, if any, they should place on such

The Inheritance Tax Guide

From Cocoon Wealth