With so much uncertainty being caused by the global coronavirus crisis, now may be the time to consider protecting the future growth in your estate from inheritance tax.
Here are three areas you may want to discuss with us, to protect the value of your estate.
1. Gifting assets
When considering inheritance tax and family planning, the potential capital gains tax on a gift can mean that it is not tax efficient to gift assets in your lifetime.
But with the economic impact that the coronavirus is having, now may be the time to make gifts of assets that do not qualify for any of the inheritance tax reliefs, such as Business Property Relief or Agricultural Property Relief. Assets such as share portfolios and property.
Assets that are currently standing at a capital loss could potentially be gifted to a family member or a family investment company without incurring a capital gains tax liability for the person making the gift.
2. Transferring assets to a trust
You could also consider transferring assets to a trust, where capital gains tax is not an immediate issue, due to the ability to defer the capital gain. The reduction in value of a particular asset could mean that you are now able to make a gift up to the value of your available inheritance tax nil rate band, which would not have been possible before. This would avoid a charge to inheritance tax in your lifetime and remove future growth from your estate.
Before any gifts are made it is important to seek advice regarding any other potential tax liabilities, for example stamp duty, and the how the legislation applies to your particular circumstances.
One important piece of legislation to be aware of is the future use of capital losses. Where capital losses are generated on transactions between connected persons, they can only be used against capital gains generated with the same connected person.
For individuals who have had the responsibility of submitting inheritance tax returns and dealing with an estate, tax reliefs can be available where certain assets have been sold at a value less than their value at the date of death, probate value.
These reliefs apply to qualifying investments, which are broadly listed stocks and shares and unit trusts, and interests in land.
If you are an executor currently with a portfolio of shares that has fallen in value, now maybe the time to crystallise the loss and mitigate the loss in value with a saving in inheritance tax.
For specialist advice for your personal circumstances, please contact