Part 3 of 3

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Transcript part 3 of 3

Fiona Julian: Gordon, you have been giving us loads and loads of financial advice this morning, for those of you who have missed out on any of these top tips, you can go to where you will find Gordon’s website.

Gordon we were talking about all sorts of things to do with inheritance tax, but now, perhaps we could talk about equity release mortgages.

Gordon Tate: Ok, yes.

Fiona Julian: Can you explain those to us?

Gordon Tate: Ok, well, it seems there are a growing number of elderly people in the UK who are what we call asset rich and cash poor; they are living in nice big luxury houses, but their incomes have dropped considerably for many reasons. One that I can think of at the moment, I was contacted recently by two daughters, their father had died and unfortunately his pensions died with him their mother was living in a house worth three quarters of a million pounds and she had a pension of £5,000 per year to live on, and she wasn’t managing too well. Therefore, they wanted to increase her income, so in essence, we arranged for an income to be taken out of the house of £10,000 per year, and because the house was above the Nil Rate Band, (£300,000), when she dies 40% of the profit goes to the tax man. Any money she now draws as income is being taken away from that band that would have been taxed at 40%, so in essence, the tax man is effectively funding 40% of her income for her.

Fiona Julian: Oh, that sounds like very good news, especially, just to recap, we said at the very outset of the programme, that actually on inheritance tax, the individuals are already paying tax while they were working.

Gordon Tate: That’s right, and although when you sell your home you don’t pay any capital gains tax on it because it is exempt, being your prime residence, when you die your home does form part of your estate and is liable to be taxed under inheritance tax rules.

Fiona Julian: And again, key to the interview and our discussions is that you have got to keep having your will revisited.

Gordon Tate: Absolutely. I can’t stress that enough, because good old Gordon Brown as was and now Alistair Darling, think it is great to keep changing the tax rules so that what did work, no longer does, so therefore, you have to keep changing your estate planning to keep up with all the latest changes.

Fiona Julian: Well I really hadn’t appreciated until talking to you this morning, what a game it is, and it is just a game.

Gordon Tate: It is, ask any estate planning solicitor, they will tell you that.

Fiona Julian: I need to get this professional advice, because, I am in my late thirties, but I haven’t made my will yet, you know.

Gordon Tate: You need to contact a good solicitor and get your will made instantly. One thing I will say though, with will planning, you can still only remove £600,000 approximately from the taxable estate. Everything over that is still going to be taxed at 40% and there have been quite a few ideas brought into play over the years, and then the Chancellor has stopped them, but one simple way that will always work is that we work out what the tax liability is going to be on the estate, we take out a life insurance policy on both parties, the husband and the wife that pays out on the second death. It is a lot cheaper than normal life assurance, because it does pay out when the second party dies and not the first. That would then be set up in trust, which means that the benefits are totally outside of the estate, then paid immediately to the trustees, who would then pass them over to the beneficiaries who can write a cheque to the HMRC, to pay the inheritance tax liability, which means that then the estate could be probated without any delay, because one of the big problems, most people find is, if an elderly person dies and their wealth is in assets, rather than cash, and even if it is in cash, the bank accounts are frozen, the life insurance policies are frozen, the assets are frozen, nothing can be disposed of until the inheritance tax has been met in full. This can take a long time, and meanwhile, how do they pay the inheritance tax, if they haven’t got access to the assets?

Fiona Julian: Yes, Catch 22, you’re stuck.

Gordon Tate: Yes. The proceeds of this fund that is outside the estate is paid immediately on proof of death to the beneficiaries, they write a cheque, give it to the Inland Revenue, the Inland Revenue can then issue probate, as and when they are ready to.

Fiona Julian: Well, you have given us such food for thought, I have been writing down things as we been speaking this morning and  I think that the two top ones that I have got is, see a professional, definitely see a professional and re-visit your will every two to three years.

Gordon Tate: Yes, definitely. We could also incorporate other strategies such as certain types of investments, and we have a type of investment that can remove all of the investment from the estate in two years, which means instead of having to live for 7 years after making a gift, you can set up this type of investment which would be outside the estate after two years. There is also an alternative one, that can be done, which would remove approximately 50% of any investment immediately from the inheritance tax calculation and then over 7 years the other 50% would gradually be removed as well. So we have quite a number of ideas that we can incorporate that would effectively remove a person’s estate from the clutches of the Inland Revenue.

Fiona Julian: I like the word you used there, strategy, because it is a strategy, I was saying it’s like a game, it’s like chess, it is strategy.

Gordon Tate: Absolutely, yes.

Fiona Julian: And knowing what impact one move is going to have on something else.

Gordon Tate: Sure, yes.

Fiona Julian: And I was informed over the weekend, I don’t know if you read this in the papers, but there was stuff about what Mr Geldof is doing with his buildings and stuff, so that his kids don’t have to pay inheritance tax.

Gordon Tate: I didn’t actually, no, which paper was that in?

Fiona Julian: I believe it was in the Daily Mail.

Gordon Tate: Ah, no, I got the Daily Express.

Fiona Julian: If Sir Bob is sorting out his, well, getting his house in order, if it’s good enough for him, it must be good enough for the rest of us.

Gordon Tate: Absolutely, I mean it is a fact, that there are a lot of people whose estates are paying inheritance tax, that never needed to. The reason they are paying inheritance tax is down to apathy, because they have never bothered to look into it, or it is something they meant to do, but never got around to, so the problem is, none of us ever know when death is going to happen.

Fiona Julian: And we don’t like to talk about it.

Gordon Tate: And we don’t like to talk about it and as I said earlier, these people who feel that if they make a will, or if they do inheritance tax planning they are tempting fate, as long as they don’t do anything about it, they think, I won’t die. Unfortunately, death and taxes are the two things you know are always going to happen!

Fiona Julian: Yes, they are a certainty, but again, we just don’t, we like to avoid it.

Gordon Tate: Yes, but inheritance tax is, in the main, a purely voluntary levy that you don’t have to pay if you are prepared to do something about it.

Fiona Julian: Well, Gordon, I would like to say a big, big thank you for all the information you have given. I have written down loads and I hope that the listeners have written down loads, and I will be going on to your website, that is to have a look there. If I want to call you, what number can I use Gordon?

Gordon Tate:             0845 013 8659

Tel: 023 92 571183

Fiona Julian: So that’s             0845 013 8659  

Tel: 023 92 571183
   , but you are not there 24 hours a day surely?

Gordon Tate: No, I’m not, but I do have a voicemail turned on permanently, if I am not there my PA or paraplanner usually are or you can send me an email to .

Fiona Julian: Well, you have been brilliant Gordon, and perhaps you will come back and speak to us another time.

Gordon Tate: I would love to Fiona.

Fiona Julian: Thank you very, very much, thank you Gordon, have a good day.

Gordon Tate: You too, thanks, bye.

Fiona Julian: Thank you very much Gordon.  Wasn’t that interesting, loads of information on inheritance tax. I will give you Gordon’s contact details later in the show.