MaliA wrote:
Could anyone offer any suggestions for me, as it's an area I think I've got a handle on, but not completely sure?
Tax planning:
Alexia Hammerfist is 55 years old. She has a good job as senior management in BigPharma, and will receive a generous pension scheme on retirement. She has 2 sons, Damon and Graham. Damon is married to Justine and they have one child. Graham is single, and disabled after a car accident two years ago.
Alexia has the following assets:
House (primary residence) £450,000
Cash in various bank accounts £130,000
Chattels (including private car) £17,500
Yacht £25,000
Unquoted shares (fro the company she works for, were worth £30,000 when she got them in 2005) £60,000
There is no nil rate band available.
I think that making lifetime gifts would be a good idea, here. Using the annual exemptions to give the cash away yearly to D and G, would reduce that amount down. I'd ask if she needs/uses the yacht a lot, and try and get rid of that. The shares present a dilemma, due to the Business Property Relief available on them, but as they are of substantial value, gifting them is a good idea, provided the recipient can hold on to them for 2 years. She can't really give the house to anyone, as the benefit is reserved, so getting a hit on that would be a pain although her getting married again would be a good idea and solve the house problem. Other considerations I'm not to sure on, as she'll be OK when she retires, but giving away large amounts of money to her kids early on could lead to problems, and sticking it in a discretionary trust for them leads to more charges upfront. Graham getting married would also free up some cash to be given away to him, as part of the marriage allowance.
Any ideas?
I haven't done IHT for a while, and this is without reference material, so DO NOT USE THIS ADVICE IN REAL LIFE.
She isn't dying any time soon, and isn't rich. She needs to keep some cash but the pension should cover that.
Keep the shares as they will be IHT free now or later, so gifting them now does nothing. Also, if she sells the shares, she has a CGT issue, so thats a bad idea.
Yacht is a depreciating asset, so if she dies in 20 years time will probably be worth naff all. But gift it and you pass over current MV as a PET which isnt great if she buys the big C next year. If you sell the yacht, you have cash, which is a PET if you give it away or taxable if you still have it, so you haven't solved anything if she dies soon anyway.
Dribble cash out bit by bit is good. A&M trust for a disabled son should be ok from an IHT perspective so you can drop a shit load into that now and it will always be safe. Also an A&M trust for the grandkid. Not sure if there is a 10 year charge.
Something to do with Woodlands. Work that one out yourself.