Tag: Inheritance tax savings

If you want to safeguard your assets for your family, it is important to make sure you put as much protection in place as possible whilst you are still able to do so. However, whilst you are alive it is important that you have full access to, and use of your assets, so that your quality of life is not jeopardised. This is particularly important during your retirement when your ability to replace capital is significantly reduced.

Effective planning does not involve you giving everything away or putting your own financial security at risk for the benefit of your family. Instead it is about giving you the peace of mind of knowing that whatever happens in the future, you or those you trust will remain in control of your assets and you will not lose them to the state.

Consider the following questions:

How much of your estate would you be prepared to lose to pay for long term care fees?
Who would you trust to look after your affairs if you could not look after them yourself?
Would you be happy for your children and grandchildren to lose 40% of your estate in Inheritance Tax?
How would you feel if your assets ended up in the hands of someone you have never met?
What would happen to their inheritance if one of your children divorced after your death?
Do you want to leave the financial security of you and your family to the roll of a dice

Using trusts to protect your assets

For around 900 years the wealthy have used trusts to protect their assets for their family. A trust is a legal concept that started in the Crusades and has developed over the centuries to become a robust mechanism used worldwide.

Trust are now a very important part of everyday life. Your pension is a trust, every charity is a trust, some schools and hospitals are trusts and every new parent now has access to a child trust fund for their new born.

A trust has the benefit of simply putting a legal barrier between your trust assets and everyone other than your chosen beneficiaries. By naming your bloodline (or anyone else you wish to benefit) as the beneficiaries of your trust, you guarantee that the rest of the world will not be able to share in the trust’s assets.

If you use a trust to protect assets you are able to specify how and when your chosen beneficiaries receive a benefit from your estate. You can impose restrictions, conditions or time limits on gifts. This can be of enormous benefit to the long term security of your loved ones.

For example:

If you leave money outright under your Will to your son or daughter who is in the middle of a divorce, this will be a very nice windfall to his or her estranged spouse
Leaving your estate outright in your Will to your spouse who then goes into care, is a very nice windfall for the local authority
Leaving a sum of money in your Will to your grandchild at 18 who falls in with the wrong crowd could see it disappear within days of your death
Leaving a sum of money outright to a disabled beneficiary in your Will, means they could lose all of their means tested benefits

By making the above gifts via a trust you will be able to:

protect your son/daughter from losing their Inheritance
reduce the risk of losing your entire estate to the Local Authority in care fees
delay the gift to your grandson until he is responsible enough to appreciate it
protect the benefits of your disabled beneficiary

The wealthy learned many years ago that if they wanted to protect their bloodline they needed to put the correct documentation in place. Over the generations they have written the rules that guarantee wealth can pass down through their generations safe from divorce, remarriage, illness and tax.

These same rules can protect you and your family and give you the satisfaction of knowing that you have done the very best for them.

Want more information? Get in touch or come to our FREE seminar. Call us to book your place.

Business Property Relief (BPR) is a relief that reduces the taxable value of relevant business property for Inheritance Tax (IHT) purposes on transfers made both during an individual’s lifetime and on death.

Relevant business property includes assets such as a business, an interest in a business, shares in an unquoted trading company and land, buildings, machinery or plant owned by an individual personally but used wholly or mainly for business purposes by a partnership in which they are a partner or a company which they control.

In general, in order to qualify for BPR, the business property concerned must have been owned by the individual for two continuous years before death or transfer and meet certain conditions. However, if there is a rights issue in a company under which further shares are offered to all shareholders and the deceased shareholder had taken up his or her issue then, provided the allocation is linked and proportionate to shares already held by the deceased shareholder, the new shares fall within the reorganisation of share capital rules and qualify immediately for full relief from BPR.

Relief is given at a rate of either 100% or 50% depending on the property concerned. A transfer of a business, an interest in a business or unquoted shares in a trading company would qualify for 100% BPR whilst the transfer of land, buildings, machinery or plant owned by an individual personally but used wholly or mainly for business purposes by a partnership in which they are a partner or a company they control will only qualify for 50% relief.

BPR will not be granted where a business consists, wholly or mainly, of dealing in loan notes or shares, dealing in land or buildings or making or holding investments. BPR will also be denied where the business property concerned is subject to a binding contract for sale. This can include binding agreements by co owners to buy out a deceased’s share of a business. These arrangements should be avoided and cross option agreements explored instead as these preserve the BPR available.

BPR can be claimed in a lifetime on the making of a gift of shares in a Trading Company. Gifts crystallise the BPR available but what you have to be careful of here is that if the shares are sold by the person you give them to and you die within 7 years of the gift then the BPR is lost. This is a claw-back provision under Section 113A of the Act.

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