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Since 2007, more than 600,000 properties have been subject to a large drop in asset value due to falling property in real estate markets and their associated stocks. This has resulted in the removal of nearly £1bn from potential inheritances, according to a leading Hampshire lawyer.
While some clients may decide to hold onto these assets until market conditions improve before making estate decisions, they could actually benefit from significant tax savings by arranging now and using depressed asset values in accordance with a main will. lawyer.
One of the traditional ways to save valuable assets from 40% inheritance tax is to gift them to the recipient through family trusts and as long as they survive for seven years after the gift is given. It is also possible to defer any Capital Gains Tax that would occur on the disposal.
For wealthier clients who also want to give a gift of more than the maximum amount (£325,000), a transfer to a lifetime trust may result in an immediate charge to IHT due to the 2006 finance law. In addition to this one-time charge, There is a periodic charge to IHT on the underlying principal value of the assets. Once the gift is given, the giver also relinquishes control over the gift, which could worry the giver if the recipient is not responsible for the gift or the relationship could sour.
Despite the potential advantages of this system, there is also the system of family companies that can grant the benefits of financial guarantee but without the possible loss of control over the asset.
The family partnership works on the basis that the older family members/asset holders form a partnership and donate the partnership interest to the younger family members/beneficiaries. Under the terms of the agreement, recipients are not entitled to access the money until a specific age. The agreement also allows authorized persons to exclude a certain person based on their age or if they are not an immediate family member.
The initial partnership transfer does not incur a fee if the amount is over £325,000 and is more suitable for high value cases. The seven-year survival period still applies.
Unlike lifetime trust structures, there is also no ongoing periodic charge for IHT. However, trusts provide greater flexibility and are still more suitable for making provisions for minors.
To summarize, now is the best time to plan for your future and decide the best method to maximize the amount given to your loved ones.