How we helped Huw and Tesni to support their family

Making it possible to manage family wealth

We work with families to ensure that all their financial arrangements are working together to maximise tax and ISA allowances for the whole family. It’s not just a question of the present, but also ensuring that inheritance tax (IHT) is mitigated in the future.

Getting to know Huw and Tesni

Canaccord Wealth was recommended to Huw and Tesni by their accountant, who felt their tax situation was becoming too complicated for her level of expertise. They have always worked in the family business – they met when Tesni joined as Huw’s secretary – but now wish to retire, although Huw will stay on the board and do some consultancy when needed. They have always lived well within their means, and their children attend local state schools, where they are doing well. Both children hope to go on to university, and Ffion, the older child, is aiming for Oxbridge.

Why they needed our help

When Tesni and Huw first consulted us, they told us they wanted to sell most of their shares in the family business and use the proceeds (around £3m) to create an income of around £60,000 per year (in addition to any income they would get from their pensions). They wanted to progressively involve the children in family financial decisions as they grew older, and make sure they didn’t have to pay excessive amounts of IHT when they inherited the remainder of their parents’ capital.

Our Canaccord Wealth solution

We began by creating a cash flow plan to show how Huw and Tesni could create the income they wanted, and how their capital would last over time.

As soon as they were ready to sell, they had the relevant conversations with their accountant to set up their application for business asset disposal relief (for once the sale of their shares had completed). This would save them around £180,000 - 18% capital gains tax (CGT) on the first £1m, as they would pay 10% on that rather than 28%.

Working closely with their accountant and solicitor, we set up a multi-generational family investment company (FIC). The couple made a loan of £3m to the FIC, which would be invested in a multi-asset portfolio, designed for income generation rather than growth. Tesni and Huw would then take repayments from the loan of £60,000 per year, tax free. This required a sophisticated structure that ensured the couple would be provided for even if they lived to a very old age, would help protect the family finances in the event of a fall-out or divorce, and gave them clarity over their children’s and grandchildren’s futures.

We also had to consider IHT. While their capital was still tied up in the business, it was not liable for IHT, but the proceeds would now form part of the couple’s estate for tax purposes.

What happened next

The FIC structure allows Huw and Tesni to transfer shares to their children, and gradually bring them into conversations about the family finances. When the children reach 18, they will be able to attend shareholder meetings and become more involved in decisions about their own finances and futures.

Keeping in touch

Continuing to work closely with the family’s solicitor and accountant, we regularly review the FIC portfolio to ensure it is still meeting the family’s income requirements. We talk to Huw and Tesni about the children’s current and future needs, and look forward to including the next generation in our conversations soon.