Each week, aprofessional investor tells us where he'd put his money. This week: Alex Davies of Wealth Club.
Four years ago, on 5 August 2013, a change to the rules governing individual savings accounts (Isas) enabled investors to hold stocks listed on the Aim junior market within the tax-sheltering accounts for the first time. Since many Aim stocks qualify for inheritance tax (IHT) relief, the rule change created an opportunity for investors to mitigate tax upon death by constructing an "IHT-free Isa".
Such Isas allow you to pass on assets to whoever you wish without a penny due in inheritance tax, assuming you held the shares for at least two years and at the time of death. Not all Aim stocks qualify for IHT relief and they are often deemed as being higher risk. However, many Aim companies are far from being start-ups. The top ten holdings on Aim are worth more than £19bn.
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Picking your own IHT-free Isa stocks is not for everyone. You need to ensure the stocks continue to qualify for IHT relief, and to keep meticulous records of when you bought them. A popular no-hassle solution is to choose a ready-made Aim Isa portfolio. We like those run by Octopus, Unicorn and Puma. But for those who want to go it alone, the following Aim stocks are among our favourites.
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