Advice on inheritance tax provided over three decades ago has been ruled as unsuitable.
The advice came from Friends Life Services Limited, who in 1997 advised Mrs L that she should take out an investment bond. This, she was told, would help to alleviate her inheritance tax liability.
Her daughter – the executor of the estate – stressed that the land owned by her mother was agricultural, as so would not have been subject to the tax. As a result of this, she made a complaint against the company that the advice provided hadn’t been suitable.
This was rejected by the provider, who claimed that Mrs L would have brought this to attention at the time it was given had there been a problem.
However, the Financial Ombudsman agreed with Mrs L’s daughter. The stated that before Friends Life provided advice, they had an obligation to establish the existence that the client’s estate would be liable for inheritance tax.
Despite further dispute from Friends Life, they were required to pay back the premiums, along with simple interest of 8%.
Commenting on the outcome of the case was Dara Islam. The Ombudsman stated: “I don’t think the advice was suitable. Issues central to the point of inheritance tax liability – relating to the land and whether it was for farming – don’t seem to have been bottomed out.
“Friends Life said farmers tend to have greater knowledge than the average person, of minimising tax and obtaining tax breaks. Whilst this might be true for some farmers, I’m not persuaded this was the case with (Mrs C’s mother).
“I appreciate Friends Life said both Mrs L and Mrs C could have challenged this at the time, but I don’t think they could have if they didn’t know the advice was unsuitable, and simply relied on that advice – as seems to be the case.
“Despite what Friends Life says, I’ve seen no other evidence that Mrs L was aware that she didn’t have an IHT liability (despite calculations) and choose to go ahead with the recommendation anyway.”
