Inheritance Tax PlanningProperty Portfolios

presented by

Pickerings Solicitors

Emma Harrison

9th February 2017

Pickerings Solicitors

• Based in Tamworth

• Serve the Midlands/Staffordshire area

• Comprehensive legal advice service

• Solicitors that specialise

• Holistic estate planning advice

• Collaborative working method

Inheritance Tax Planning

• Head of Private Client at Pickerings

• 20 years experience

• Team of four specialist solicitors

• Holistic estate planning advice

• Collaborative working method

Inheritance Tax

Inheritance TaxThe Basics

• Applies to value of worldwide estate on death

• Includes any assets gifted in previous 7 years

• Includes assets placed in Trust in previous 14 years

• Includes assets gifted where a benefit is still received

Inheritance TaxThe Basics

• £325,000 tax free allowance

• Additional allowances for Business and Agriculture (up to 100%)

• Roll over relief between spouses

• April 2017 Residence Relief introduced

Inheritance TaxEstate Planning

• Everyone is different

• Need to look at the whole picture

Lifestyle (now and future)

Income Needs

Family Situation

Asset Structure

Inheritance TaxOptions

• Gifts – 7 Year Rule

• Trusts

where its not appropriate to gift direct

to keep assets outside the estate

• Insurance

• Financial Products

Inheritance TaxOptions

• Good planning takes time!

Inheritance TaxProperty Portfolios

• Issues:

Often provide an income that cannot be lost

Do not qualify for BPR

Unlikely qualify for Residence Relief

Capital Gains Tax (18% or 28%)

Stamp Duty Land Tax (3% premium)

Often subject to mortgage

Inheritance TaxProperty Portfolios

• Solutions

Outright Gifts

Debt Structuring

Insurance

Trusts

Company Structures

Outright Gifts (person to person)

• Must survive the gift by 7 years

– Taper relief may apply if death does occur in 7

years

– Can be affected by any trusts created in the 7 years

before the gift

• Must not retain any benefit

• Deemed disposal for CGT

• No SDLT (provided no money changes hands)

Debt Structuring

• Two possibilities:

– Increase debt on the portfolio and gift the cash

• Allows retention of income but reduces the capital value

in the estate

• No CGT/SDLT

• Same rules apply to the cash as previously mentioned

– Replace mortgage on personal residence to

investment properties to maximise Residence NRB

Insurance

• Simplest ideas are often the best

• Identify potential tax liability and insure for

that sum

• Ensure the policy is nominated!

• Usually only a short term solution due to

premiums but can be less than loss of income

and tax bill of gifting assets away.

Trusts

• Can retain control as a Trustee but no benefit

• Protection of the assets from folly

• 7 year rule applies

• Capital Gain can be “held over” into the Trust

• Potential ability to retain an income by loaning

the assets to the Trust and being repaid via rent

• SDLT will apply

• Difficult to obtain mortgages

Incorporation/F.I.C.s

• Will not qualify for BPR

• Transfers in will be subject to CGT

• SDLT on value not consideration

• Different classes of shares

• Can be beneficial for income tax

• Use of Trusts to hold shares for beneficiaries

• FIC shares can only be held by family

• New Buy to Let Mortgage products

What now?

What now?

• Tax planning is not “One size fits all”

• It is not always a one solution strategy

• There needs to be joined up planning

• Regular review

• Involve good advisers

– Solicitor

– Accountant

– Financial adviser

Contact Us

Pickerings Solicitors

Etchell House

Etchell Court

Bonehill Road

Tamworth

B78 3HQ

01827 317070

eharrison@pickerings-solicitors.com