Research from Prudential found that 69% of the 104 UK advisers surveyed expect IHT planning demand to grow over the next year, with 37% predicting a significant increase.
Regulatory changes, however, have left 17% of advisers lacking confidence in their ability to advise on IHT issues and they want to develop links with legal firms and other specialists.
A third of advisers say they are considering strengthening links with lawyers, while 22% are already working with legal firms.
Nil rate blands
The demand for IHT planning is being driven by new rules that came into effect in April 2017, according to around 60% of advisers.
They said that the rules are complicated but include an additional £100,000 per person residence nil rate band, which will increase each year and complements the standard nil rate band to provide a potential £1m ($1.29m, €1.16m) IHT allowance for a couple by 2020/21.
Increased access to pension savings as a result of the pension freedoms, the ability to leave pension wealth to family and rising property prices are also major factors.
Trust enquiries
Paul Harrison, head of business consultancy at Prudential, said: “Rising property and pension wealth are making it increasingly important for advisers to be able to help clients with specialist advice on IHT planning and demand for advice is booming.
“However, providing that advice is becoming more complex with changes to pension rules as well as IHT limits, and advisers are absolutely correct to work with other specialists to ensure that clients are receiving the best possible support.
“Clients with final salary schemes who are seeking to take advantage of the flexibility of pension freedoms are a major source of IHT advice enquiries, advisers say. About three quarters (77%) of advisers have seen a rise in clients with final salary schemes asking about IHT planning with 59% reporting significant increases.
“One specialist area that is driving demand for IHT advice is enquiries about using trusts – more than half (52%) of advisers say they have seen a rise in enquiries about trusts for IHT planning.”
Familial complexity
Kelly Greig, partner at law firm Irwin Mitchell Private Wealth, said: “With the introduction of the residence nil rate band, large number of clients with second properties and increasing complexity of inheritance tax (IHT) mitigation, it is not just consumers who are seeking expert legal advice but increasingly financial advisers who are turning to lawyers to help with their clients’ needs.
“Modern families are also becoming more complex with multiple marriages and cohabitation more common. This makes wills and trusts more complicated and estate planning, which should integrate legal, tax and financial planning, is often best served when financial advisers and legal/tax planning advisers work together.
“Financial advisers who work closely with lawyers can ensure that their clients and families do not face a legal or tax problem in future, and that their clients’ families benefit from an inheritance as intended.”
