Rachel de Souza

Written by: Rachel De Souza

Rachel de Souza

Partner

Plunging asset prices – should grandchildren be cheering?

Coronavirus has brought home our mortality. I cannot remember a situation where death has been at the forefront of the news for a sustained period of time. It is very likely that the older generation may now want to get round to some estate planning, rather than keep putting it off.  

Gifting assets outright remains the simplest way of mitigating your inheritance tax liability. However, where assets are standing at a capital gain, there will be a capital gain tax charge on the gift. Often the thought of paying capital gains tax on the gift can prevent the asset owner from taking any action.

Now that stocks and shares have fallen in value so dramatically, gifting should be revisited. The capital gains tax deterrent has probably fallen away entirely or at least significantly. Gifting also starts the inheritance tax seven-year clock. The sooner the gifts are made the sooner they will fall outside of your inheritance tax estate. Even if you die within the seven-year period, the currently depressed market value of the assets will be brought into account. If you do not make any gifts and asset prices rise by the time you die, it will be the market value at the date of death that is taken into account in calculating the inheritance tax liability rather than today’s lower values.

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