The vast majority of people attempting to mitigate against punitive levels of IHT are losing out because traditional discount plans are biased towards a tiny minority – leaving most taxpayers high and dry as far as family access is concerned, argues specialist investment manager WAY Group.

Figures suggest that in future approximately nine out of ten 70-year olds will live for the minimum seven years required to qualify for inheritance tax relief – meaning that they will not need to take advantage of any discount on their initial gift.

WAY Group chairman and technical director Paul Wilcox says, ‘The standard approach to IHT planning is outdated and belongs to an age when products were extremely basic.

‘Clearly a discount value to any amount gifted is essential for the ten per cent of 70-year olds who will on average not make it through the seven-year period before gifts fall out of account (and are able to escape the 40 per cent tax hit) – but we are more concerned that the vast majority, the other 90 per cent, who don't need the discount are not penalised and can take advantage of a flexible arrangement that gives the best of both worlds.’

To satisfy the needs of an ageing population and the dramatically rising number of people whose estates will fall liable to IHT, WAY Group has developed the Duo Inheritor Plan, delivering a discount on the gift into trust, but – in contrast to a discounted gift plan where funds are ‘locked in’ – also offers significant flexibility over 60 per cent of the amount gifted.

Linked to a unit trust/open-ended investment company (OEIC) and not a bond, Duo aims to provide investors with a highly tax-efficient IHT planning vehicle.

Wilcox explains, “The discounted gift is created by delivering regular monthly drawings for the first eight years in the form of fixed reversions.

‘Interestingly (and as to be expected since eight years of drawings represent an increasing proportion of older life expectancies) the discount difference between Duo and traditional schemes disappears as the donors get older.’

For more information call 01202 890895 or visit www.wayinvestments.co.uk