Dear all,
Merry Christmas! My family is currently planning how to structure an estate held by my father and mother which, originally bought for £1m and due to the rapid property rises, is now valued at £7m. It consists of around 15-20 properties, 80% residential, 20% commerical. All commerical properties and held jointly by my father and mother, and all residential properties however some have a childs name also.
We wish to plan for the future, and possibly develop some of the residential properties. Our initial idea is to develop some of the propertes for sale, then to use any profit after paying a £1m loan outstanding to pay capital gains tax on the transfer of all assets to a trust. One family member would then manage the trust and provide income for my parents.
We understand we will need to consult with a tax specialist on this, however we would appreciate any help that those of you working in this area could provide.
Many thanks.
Planning for a £7m estate
7 posts • Page 1 of 1
by diamondproperty on Mon Dec 25, 2006 5:28 am
- diamondproperty
- Posts: 1
- Joined: Wed Aug 06, 2008 3:47 pm
by Peter D on Mon Dec 25, 2006 11:13 am
With this number of properties I would assume the holdings are within a Ltd company. You may even be Diamond Holdings Property Ltd of Southhampton and you already have Business, Corp Tax and FA's so I am not sure this forum is the place to seek information on Christmas afternoon but no doubt some will be along in due course. You will need to detail how these properties are held at present and how the business is structured before anyone can help other than point you to 'Find A Professional' in the Help section on the right. I wish you a Merry Christmas if you celebrtae it, if not have a very nice day. Regards Peter
- Peter D
- Posts: 9030
- Joined: Wed Aug 06, 2008 3:37 pm
by atatum on Fri Jan 05, 2007 3:22 am
One of the things you need to in addition to tax planning for the life of the peope involved is tax planning on death. If your parents are married to each other when one of them dies they will be able to inherit personal assets IHT free under spousal privillidge, but on the second death will will end up paying 40% on the value of the estate above £285,000.
I have included the text from a recent article I have written that might start you thinking but if you need more help on planning the IHT position please contact me Directly either via my website www.nls-bucks.com or on 0845-3700-240
Here is the tect of the article
Introduction
So what is IHT, it is one of the last taxes the taxman
will ever get from you. Paid by your estate after your
death. It is a taxed charged on your accumulated wealth.
Consider it as the fee you will pay to the government
for allowing you to leave at least some of your wealth to
who you choose.
What will IHT be levied on?
IHT will be charged on everything in your estate above
the nil rate band threshold. In 2006/7 the nil rate
band threshold is 285,000 pounds, It is also possible that
you will be charged IHT for assets you have given away
within the last 7 years of your lifetime. When we talk
about assets this can include, your home, other property,
and pretty much anything you own with some exceptions.
With the rise in house prices the number of estate being
Subjected to IHT has started to rise exponentially.
In 2005/6 the tax raised from IHT was 3.3bn pounds. The
Governments own estimates suggest a further 22% of
Estates will have to pay IHT during 2006/7.
Will You have to Pay IHT?
If you are married or living in a civil partnership
You can pass on your estate to your partner free of IHT.
With early careful you should be able to reduce or
eliminate the need to pay IHT/
Everyone has an IHT allowance or free sum, for the tax
year 2006/7 on death this allowance is 285,000 pounds and
for the tax year 2007/8 this rises to 300,000 pounds,
by 2009/10 this is set to rise to 325,000 pounds.
I mentioned earlier some exemptions which allow you to
pass on amounts of money during your lifetime without
incurring any Inheritance Tax. These include spousal
exception mentioned earlier, where a spouse or civil
partner can inherit free of both Capital Gains Tax and
IHT. Also nearly all gifts made more than seven years
before your death are exempt. Other gifts, such as wedding
gifts and gifts in anticipation of a civil partnership up
to a value of 5,000 pounds, can be exempt but this does
depend on the relationship between the person giving the
gift and the recipient. Gifts to charity of any amount
and 3,000 pounds given away each year are also exempt.
Are You Leaving your Family in the lurch?
Leaving your family and friends a nice nest egg sounds
like a very pleasant thing to do, but by doing this are
you also leaving them with a tax burden? If your estate
is valued over the nil rate band and does not qualify for
one of the exemptions mentioned previous then you
executors will be forced to pay 40% of the value of your
estate over the nil rate band to the taxman. This money
has to be found within six months of your death and
paid prior to any asset being sold or transferred.
This causes a problem for many executors which they
have to solve by personally take out bridging loan to
settle the estate.
It is legal to plan not to pay inheritance tax, earlier
in this article I called IHT one of the few taxes you can
opt out of. Through the work we do at Boon Solutions we
see a large number of clients a year, I have yet to meet
a client who when given the choice opts to pay IHT to
the taxman.
Planning to Avoid Inheritance Tax
If your aim is to reduce or eliminate your IHT bill what
steps should you consider?
The sooner you start to plan to avoid IHT to more
effective the end result will be. The best time to start
planning is yesterday but that has already gone so start
today! Remember IHT could take 40% of everything you own
above the nil rate band, this could be an enormous sum, so
get professional help from an experienced will writer and
estate planner, it may cost you more than the DIY will kit
from the high street, but it should show a higher return
on investment in the long term.
So what do you want your will writer to do for you?
The answer is simple use every trick in the book to ensure
you are making maximum use of your nil rate band and where
you are married or in a civil partnership you have
balanced your assets to achieve this.
Just making the most effective use of your nil rate band
could have already reduced your inheritance tax bill by
114,000 pounds, in 2006/7 tax year. An IHT saving will is
Likely to cost in the region of 750 pounds, a small price
to pay if you have just saved 114,000 pounds, in IHT.
Step 2. Remember you can only be taxed on things you own.
Ensure whatever assets you do not actually need or
currently have access to are transferred outside of your
estate.
If you are taking out new life insurance policies get them
written in trust, see if any existing life policies can be
transferred into a trust. With pensions that you are not
already taking, particularly ones with a death in
service benefit, complete a nomination of wishes form to
make sure that any benefit goes directly to the person you
choose and not into your estate.
Step 3. Do not just think about the money you have also
think about legacies you may receive from other peoples
estates. Do you really need the gift or could it pass
in trust to your children? You can divert a legacy left
to you to someone else within two years of the death of
the person leaving the legacy or gift. This is done via a
deed of variation. This is not a simple thing to achieve
but can vastly reduce your IHT liability, so again seek
the advice of an estate planner like my own for help in
this area.
The IHT threshold or nil rate band is constantly going up
It has already risen 85% since 1996 but house prices have
risen 179% in the same time period. This increasing means
many families that though IHT would not apply to them now
falls foul of this tax. Over recent years the government
changed the rules concerning giving things to people
like house but keeping an interest in them like still
living in the house.
With your house making up a major part of your estate,
how can you keep it, but reduce its value for IHT purposes?
If you own your house as a married couple or in a civil
partnership jointly This means that you both own 100%
of the value of the house. For a 300,000 pounds, Partner A
owns a 300,000 pounds, asset and Partner B owns a
300,000 pounds asset. If either partner dies, the other
automatically becomes the outright owner of the home.
In order to reduce you assets and therefore your IHT
liability you could change the way your home is registered
at the land registry to tenants in common. This would
notionally spilt the house so each partner owned half the
property absolutely. Now on death you are the value of your
house has been Halved and your IHT liability reduced.
Investment vehicles can be used to lessen you IHT
liability. The government currently looks favourably for
inheritance tax purposes, on shares held in unquoted
businesses, farms and farmland, woodlands, and shares held
in companies quoted on the AIMS market. My Company works
closely with a number of Independent Financial Advisors
and I would always recommend seeking this kind of advice
prior to moving assets into this kind of investment
vehicle as some of these do have higher levels of risk
associated with them.
We have already covered trusts as part of your will for
reducing your IHT liability, several other trusts can
help in estate planning. Certain kinds of trust allow you
to enjoy income from assets invested, while you are no
longer the legal owner of the asset. This gives a higher
level of flexibility when planning your financial future.
Although using insurance does not actually lessen your
own liability for IHT it can be used an effective vehicle
for ensuring adequate funds exist to pay the IHT bill.
Whole of Life or on Second Death policies can be
written in trust for the same beneficiaries you have
named in your will. This money will fall outside your
estate and if planned correctly, should mean the
beneficiaries have the money to pay the IHT liability.
You could even consider paying the premium yourself
on behalf of the beneficiary as along as you only pay
this out of annual income.
Earlier I stated that if your estate is below the nil rate
band You would not have an IHT liability, an option you
could then consider is reducing the value of your estate
below the nil rate band threshold. Otherwise known as
spending the kids inheritance. It is after all your money
just make sure you leave yourself enough to continue
enjoying the lifestyle you wish to live
If you are considering giving money away or gifting money
Do not believe you have instantly cut your IHT liability.
It is your right to give away your any assets or property
you own. Giving away money will reduce the value of assets
you own but will not cut the IHT tax liability immediately
and by doing so you may be giving the beneficiary of the
gift a Capital Gains Tax problem.
The taxman allows gifts of up to 3,000 pounds each tax
year, unlimited gifts up to 250 pounds a person per tax
year are also exempt. 5,000 pounds, can be paid for
wedding gifts.
In order not to be liable for IHT on gifts you have to
live for 7 years after you have given the gift, in the
8th year there is no longer a liability to your estate
for the value of the gift.
With gifts if you make them out of your normal income can
Be exempt from IHT, the receiving party may still be liable
for capital gains tax
Gifts given between individuals incur no inheritance
tax at the time of the gift, the IHT is only payable if
the donor of the gift dies within seven years of making
the gift, the tax bill tapers off during the seven year
periods as defined below.
Years between gift and tax Reduction in tax
0-3 0%
3-4 20%
4-5 40%
5-6 60%
6-7 80%
Tax law is constantly being updated and test cases
stretch and shrink the acceptable boundaries everyday.
This article has set out a few options for you to
consider. For the latest advice please use a competent
specialist, we do attempt to keep our website as up to
date as possible so feel free to check www.nls-bucks.com
for the latest information.
IN summary do you need to bequeath 40% to the taxman? My
Answer would be no you don not, you do not have to leave
Him a penny. Just make sure you plan not to leave him
Anything doing nothing will almost certainly mean he
gets something the choice is yours!
If you need more help or this was not at the root of your question please contact me directly either via my website www.nls-bucks.com or on 0845-3700-240
I have included the text from a recent article I have written that might start you thinking but if you need more help on planning the IHT position please contact me Directly either via my website www.nls-bucks.com or on 0845-3700-240
Here is the tect of the article
Introduction
So what is IHT, it is one of the last taxes the taxman
will ever get from you. Paid by your estate after your
death. It is a taxed charged on your accumulated wealth.
Consider it as the fee you will pay to the government
for allowing you to leave at least some of your wealth to
who you choose.
What will IHT be levied on?
IHT will be charged on everything in your estate above
the nil rate band threshold. In 2006/7 the nil rate
band threshold is 285,000 pounds, It is also possible that
you will be charged IHT for assets you have given away
within the last 7 years of your lifetime. When we talk
about assets this can include, your home, other property,
and pretty much anything you own with some exceptions.
With the rise in house prices the number of estate being
Subjected to IHT has started to rise exponentially.
In 2005/6 the tax raised from IHT was 3.3bn pounds. The
Governments own estimates suggest a further 22% of
Estates will have to pay IHT during 2006/7.
Will You have to Pay IHT?
If you are married or living in a civil partnership
You can pass on your estate to your partner free of IHT.
With early careful you should be able to reduce or
eliminate the need to pay IHT/
Everyone has an IHT allowance or free sum, for the tax
year 2006/7 on death this allowance is 285,000 pounds and
for the tax year 2007/8 this rises to 300,000 pounds,
by 2009/10 this is set to rise to 325,000 pounds.
I mentioned earlier some exemptions which allow you to
pass on amounts of money during your lifetime without
incurring any Inheritance Tax. These include spousal
exception mentioned earlier, where a spouse or civil
partner can inherit free of both Capital Gains Tax and
IHT. Also nearly all gifts made more than seven years
before your death are exempt. Other gifts, such as wedding
gifts and gifts in anticipation of a civil partnership up
to a value of 5,000 pounds, can be exempt but this does
depend on the relationship between the person giving the
gift and the recipient. Gifts to charity of any amount
and 3,000 pounds given away each year are also exempt.
Are You Leaving your Family in the lurch?
Leaving your family and friends a nice nest egg sounds
like a very pleasant thing to do, but by doing this are
you also leaving them with a tax burden? If your estate
is valued over the nil rate band and does not qualify for
one of the exemptions mentioned previous then you
executors will be forced to pay 40% of the value of your
estate over the nil rate band to the taxman. This money
has to be found within six months of your death and
paid prior to any asset being sold or transferred.
This causes a problem for many executors which they
have to solve by personally take out bridging loan to
settle the estate.
It is legal to plan not to pay inheritance tax, earlier
in this article I called IHT one of the few taxes you can
opt out of. Through the work we do at Boon Solutions we
see a large number of clients a year, I have yet to meet
a client who when given the choice opts to pay IHT to
the taxman.
Planning to Avoid Inheritance Tax
If your aim is to reduce or eliminate your IHT bill what
steps should you consider?
The sooner you start to plan to avoid IHT to more
effective the end result will be. The best time to start
planning is yesterday but that has already gone so start
today! Remember IHT could take 40% of everything you own
above the nil rate band, this could be an enormous sum, so
get professional help from an experienced will writer and
estate planner, it may cost you more than the DIY will kit
from the high street, but it should show a higher return
on investment in the long term.
So what do you want your will writer to do for you?
The answer is simple use every trick in the book to ensure
you are making maximum use of your nil rate band and where
you are married or in a civil partnership you have
balanced your assets to achieve this.
Just making the most effective use of your nil rate band
could have already reduced your inheritance tax bill by
114,000 pounds, in 2006/7 tax year. An IHT saving will is
Likely to cost in the region of 750 pounds, a small price
to pay if you have just saved 114,000 pounds, in IHT.
Step 2. Remember you can only be taxed on things you own.
Ensure whatever assets you do not actually need or
currently have access to are transferred outside of your
estate.
If you are taking out new life insurance policies get them
written in trust, see if any existing life policies can be
transferred into a trust. With pensions that you are not
already taking, particularly ones with a death in
service benefit, complete a nomination of wishes form to
make sure that any benefit goes directly to the person you
choose and not into your estate.
Step 3. Do not just think about the money you have also
think about legacies you may receive from other peoples
estates. Do you really need the gift or could it pass
in trust to your children? You can divert a legacy left
to you to someone else within two years of the death of
the person leaving the legacy or gift. This is done via a
deed of variation. This is not a simple thing to achieve
but can vastly reduce your IHT liability, so again seek
the advice of an estate planner like my own for help in
this area.
The IHT threshold or nil rate band is constantly going up
It has already risen 85% since 1996 but house prices have
risen 179% in the same time period. This increasing means
many families that though IHT would not apply to them now
falls foul of this tax. Over recent years the government
changed the rules concerning giving things to people
like house but keeping an interest in them like still
living in the house.
With your house making up a major part of your estate,
how can you keep it, but reduce its value for IHT purposes?
If you own your house as a married couple or in a civil
partnership jointly This means that you both own 100%
of the value of the house. For a 300,000 pounds, Partner A
owns a 300,000 pounds, asset and Partner B owns a
300,000 pounds asset. If either partner dies, the other
automatically becomes the outright owner of the home.
In order to reduce you assets and therefore your IHT
liability you could change the way your home is registered
at the land registry to tenants in common. This would
notionally spilt the house so each partner owned half the
property absolutely. Now on death you are the value of your
house has been Halved and your IHT liability reduced.
Investment vehicles can be used to lessen you IHT
liability. The government currently looks favourably for
inheritance tax purposes, on shares held in unquoted
businesses, farms and farmland, woodlands, and shares held
in companies quoted on the AIMS market. My Company works
closely with a number of Independent Financial Advisors
and I would always recommend seeking this kind of advice
prior to moving assets into this kind of investment
vehicle as some of these do have higher levels of risk
associated with them.
We have already covered trusts as part of your will for
reducing your IHT liability, several other trusts can
help in estate planning. Certain kinds of trust allow you
to enjoy income from assets invested, while you are no
longer the legal owner of the asset. This gives a higher
level of flexibility when planning your financial future.
Although using insurance does not actually lessen your
own liability for IHT it can be used an effective vehicle
for ensuring adequate funds exist to pay the IHT bill.
Whole of Life or on Second Death policies can be
written in trust for the same beneficiaries you have
named in your will. This money will fall outside your
estate and if planned correctly, should mean the
beneficiaries have the money to pay the IHT liability.
You could even consider paying the premium yourself
on behalf of the beneficiary as along as you only pay
this out of annual income.
Earlier I stated that if your estate is below the nil rate
band You would not have an IHT liability, an option you
could then consider is reducing the value of your estate
below the nil rate band threshold. Otherwise known as
spending the kids inheritance. It is after all your money
just make sure you leave yourself enough to continue
enjoying the lifestyle you wish to live
If you are considering giving money away or gifting money
Do not believe you have instantly cut your IHT liability.
It is your right to give away your any assets or property
you own. Giving away money will reduce the value of assets
you own but will not cut the IHT tax liability immediately
and by doing so you may be giving the beneficiary of the
gift a Capital Gains Tax problem.
The taxman allows gifts of up to 3,000 pounds each tax
year, unlimited gifts up to 250 pounds a person per tax
year are also exempt. 5,000 pounds, can be paid for
wedding gifts.
In order not to be liable for IHT on gifts you have to
live for 7 years after you have given the gift, in the
8th year there is no longer a liability to your estate
for the value of the gift.
With gifts if you make them out of your normal income can
Be exempt from IHT, the receiving party may still be liable
for capital gains tax
Gifts given between individuals incur no inheritance
tax at the time of the gift, the IHT is only payable if
the donor of the gift dies within seven years of making
the gift, the tax bill tapers off during the seven year
periods as defined below.
Years between gift and tax Reduction in tax
0-3 0%
3-4 20%
4-5 40%
5-6 60%
6-7 80%
Tax law is constantly being updated and test cases
stretch and shrink the acceptable boundaries everyday.
This article has set out a few options for you to
consider. For the latest advice please use a competent
specialist, we do attempt to keep our website as up to
date as possible so feel free to check www.nls-bucks.com
for the latest information.
IN summary do you need to bequeath 40% to the taxman? My
Answer would be no you don not, you do not have to leave
Him a penny. Just make sure you plan not to leave him
Anything doing nothing will almost certainly mean he
gets something the choice is yours!
If you need more help or this was not at the root of your question please contact me directly either via my website www.nls-bucks.com or on 0845-3700-240
- atatum
- Posts: 5
- Joined: Wed Aug 06, 2008 3:47 pm
by diamondpj on Sun Jan 07, 2007 4:56 am
Hi,
Peter-I assure you we are not Diamond Properties Ltd of Southhampton! We are a family business, not company. Rent from properties is paying a £1.2m bank loan leaving profit in the partnership of my father and mother within the 22% band.
A speadsheet could be made of the properties and how they are held, but mostly the 15 properies are jointly owned by my father and mother. Most have been owned 7+ years. There are 4 children, now old, and their name is also included with my father and mother on around 5 properties.
Key concern is to develop those properties with potential into apartments, possibly 7-8 properies, (a loan is needed to do this) and then sell some properties to pay all loans and free cash within the business, with the remainder held in the longrun to be be divided equally among the four children when time comes.
We are quite worried about IHT issues, and are grateful for any help which could be provided before making a decision how to proceed.
Many thanks.
Peter-I assure you we are not Diamond Properties Ltd of Southhampton! We are a family business, not company. Rent from properties is paying a £1.2m bank loan leaving profit in the partnership of my father and mother within the 22% band.
A speadsheet could be made of the properties and how they are held, but mostly the 15 properies are jointly owned by my father and mother. Most have been owned 7+ years. There are 4 children, now old, and their name is also included with my father and mother on around 5 properties.
Key concern is to develop those properties with potential into apartments, possibly 7-8 properies, (a loan is needed to do this) and then sell some properties to pay all loans and free cash within the business, with the remainder held in the longrun to be be divided equally among the four children when time comes.
We are quite worried about IHT issues, and are grateful for any help which could be provided before making a decision how to proceed.
Many thanks.
- diamondpj
- Posts: 1
- Joined: Wed Aug 06, 2008 3:47 pm
by Tosh on Wed Jan 10, 2007 1:59 am
Hi
It may be possible to migrate the properties into an environment which will avoid the incidence of IHT and giive other tax advantages. There still isn't quite enough info to give much guidance. How old are your parents? What courses of action have you considered so far?
Tosh
toshmalone@hotmail.co.uk
It may be possible to migrate the properties into an environment which will avoid the incidence of IHT and giive other tax advantages. There still isn't quite enough info to give much guidance. How old are your parents? What courses of action have you considered so far?
Tosh
toshmalone@hotmail.co.uk
- Tosh
- Posts: 69
- Joined: Wed Aug 06, 2008 3:43 pm
by Peter D on Wed Jan 10, 2007 2:34 am
I would recommend you find a qualifed professional IHT practioner and have a detailed one to one meeting with him/her. There is a lot of information required her with visibility of accounts, loan rates, expert knowledge and use of Trusts, business structure and may be Comany Law, it appears at tpresent you are not a company but there may be some merit in putting all this under one roof. All the Best in 2007. Regards Peter
- Peter D
- Posts: 9030
- Joined: Wed Aug 06, 2008 3:37 pm
7 posts • Page 1 of 1
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