Minimise liability

[jkitto]

My father owns some rental properties, what is the best way to transfer ownership down the family line whilst minimising any inheritance tax implications?

[Nigel Lord]

jkitto

The answer, as always with tax planning, depends on your family's circumstances. e.g. how hold is your father, what is the size of the estate, are there more obvious planning opportunities, what are the market values and mortgages related to the investment properpties etc.?)

The main problem with removing investment properties from your father's estate is avoiding a capital gain on the disposal.

If a Discretionary Trust (with the next generation as a class of beneficiaries) is used as the recipient of the gift, it is possible to hold-over the capital gain. This could be improved upon if a family member is able to reside in the property for a period of time, as it would not only possible to defer any gain, but to eliminate it altogether.

It should also be possible to release equity from the properties in the form of mortgages and to use this to acquire Inheritance Tax (IHT) efficient investments.

Any IHT planning should not be undertaken in isolation. The whole estate should be reviewed to ascertain whether IHT efficient wills are in place, and whether it is possible to remove non-income bearing assets such as the family home from the estate. In addition attention should be given to the income needs of the older generation.

My firm specialises in this area of taxation. If you would like us to assist you further we would be delighted to do so.

Nigel Lord
Lord Associates
Taxation & Business Consultants
Caxton House
Old Station Road
Loughton
Essex, IG10 4PE
020 8418 9101 & 07769 931852