In globally uncertain economic times, can the fall in global stock markets be an opportunity for inheritance tax planning to preserve assets for future generations of your family? Gifts to individuals made during your lifetime are potentially exempt from inheritance tax provided you survive 7 years from the date of the gift. However, usually, capital gains tax means it is not tax efficient to gift significant assets such as share portfolios and property during lifetime. But during this globally uncertain time, many assets are currently standing at a loss or have lost any latent gains. These assets could potentially be gifted to the next generation now, whether outright, or into trust or into a Family Investment Company without triggering any CGT. Any future growth in these assets would then accrue to your chosen beneficiaries rather than you and would be outside your estate for inheritance tax purposes, potentially saving a 40% tax charge on your death.
It is of course important to ensure that you no longer require access to capital/assets you intend to gift during lifetime. For example, if you were to continue occupying a property that you had previously gifted, it would be caught by the “gift with reservation of benefit” rules and would remain subject to IHT on your death.
These are worrying times for everyone. In particular, many charities are facing a severe downturn in income as fundraising events have been cancelled. Gifts to charities are inheritance tax exempt but by giving money to charities now during your lifetime, you know your contribution is being made at a time when it is needed most.
Finally, is your Will up to date? Changing family circumstances or even a change in your intended beneficiaries may mean that any Will you have made in the past no longer reflects your current wishes. It is prudent to review and update your Will alongside any inheritance tax planning you undertake. For further advice contact Heather Lally at heather.lally@dtmlegal.com
