Brompton Private Wealth on the Purchase Model

We recently met up with Jolyon and Edward of Brompton Private Wealth who answered some questions regarding their experience and views of the purchase model at Auriens Chelsea.

What is The Deferred Management Fee?

The Deferred Management Fee is calculated as a percentage of the sale price or open market value of your apartment, if higher. It accrues at 3% for each year or part year that you own your apartment. The maximum fee is capped at 15% of the higher of the sale price or the open market value of your apartment.

The Deferred Management Fee is payable to Auriens Chelsea Property Limited by the tenant when their apartment is sold or in certain circumstances when there is a change of ownership interests in the lease or certain changes of occupiers of the apartment.

This fee works alongside the Monthly Management Fee to ensure any repairs and maintenance work can be taken care of, without the community having to worry about a lack of funds. For more information please see Auriens' Deferred Management Fee Overview.

Hi Jolyon, hi Edward. Can you tell us about the purpose of the Deferred Management Fee at Auriens Chelsea?

A Deferred Management Fee enables one to enjoy all of the amenities and facilities within the Auriens community whilst ensuring that all repairs and maintenance work to the highest standards, it is not payable until later. The Deferred Management Fee provides alignment of interest between the resident and the operator.

Auriens can provide a wonderful balance between genuine independence and being able to access and share both a social life in a caring and managed community

What are the advantages of the Deferred Management Fee?

The Deferred Management Fee can help reduce the annual running costs and as such enable individuals to access more of the funds raised from the sale of any former residence – potentially in a tax-effective environment, and freeing up funds for other investments. Due to the fact the fee is not typically payable until one vacates the property, it can ‘build up’ and act as a debt against one’s taxable estate and as such can add value through potential reduction in exposure to Inheritance Tax / IHT. It is also worth considering Auriens in the context of both looking for an effective way of utilising one’s wealth (which is in theory, what accumulated wealth is there for), whilst also ensuring that one thoroughly enjoys life, in a pleasant social environment and with the peace of mind that we all aspire to.

Can buying an apartment through a development such as Auriens help reduce exposure to taxation and in particular, to Inheritance tax?

Auriens can provide a wonderful balance between genuine independence and being able to access and share both a social life in a caring and managed community. Furthermore, home ownership has for many years (and for several generations), quite understandably been a family objective and preference, with family wealth often being largely in property (as an asset class). Whilst importantly retaining financial security, a comfortable standard of living and quality of life, in regard to estate planning, an objective can be to hand on as much wealth as possible, to future generations.

Could one see such an example of estate planning?

The average length of stay for Auriens-type residents is seven years. Any additional funds made available to individuals, due to the Deferred Management Fee, could be invested in such a way as to gain access to both tax-efficient income and capital. Through reinvesting in diversified and tax-effective structures, there is the ability to provide both a tax-effective ‘income’, a significant potential reduction in IHT exposure and increased capital values – which could in turn be passed on to future generations. Furthermore (and as already mentioned), any IHT liability could also be reduced by utilising the need to pay the fee prior to one’s estate being assessed for probate purposes – and where bespoke financial advice can add value through calculating and planning for these circumstances.

What are the benefits that clients can receive through private wealth management advice?

Working with a private wealth manager can offer added value through the following:

• Helping to maintain financial security and to pass on wealth to loved ones minimising administration
• Creating a financial plan that enables access to tax-effective income and capital
• Reducing exposure to IHT
• Providing risk management through genuine diversification in terms investment management approach

In order to receive a complimentary guide covering wealth management, retirement planning or inheritance tax planning, contact Brompton Private Wealth by telephoning 0208 042 0055 or emailing jolyon.hankinson@sjpp.co.uk