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Discretionary investment management and Lasting Powers of Attorney
Phoebe Alexander
As we find ourselves in another national lockdown, the New Year presents an opportunity for individuals to review their assets and conduct some succession planning.
Given the events of the past year, it is likely that we are going to see changes to inheritance tax and capital gains tax in the future. The Office of Tax Simplification and the All-Party Parliamentary Group have made a number of suggestions, which I will not go through at length here. However, the following may be of particular relevance to many:
- Aligning Capital Gains Tax (“CGT”) rates with income tax rates;
- Removing the CGT uplift on death;
- Removing or curtailing valuable Inheritance Tax (“IHT”) reliefs such as Business Relief and Agricultural Relief; and
- Reducing the seven year survival period to five for IHT on gifts and abolishing taper relief.
In light of these proposed changes, here are a few estate planning steps that might be worth considering sooner rather than later:
-
Trigger any chargeable gains now
CGT appears to be an easy target for reform. If you are thinking about giving away or selling assets standing at a significant gain, now may be a more favourable tax climate in which to do this.
-
Take advantage of reliefs such as Business Relief
Business Relief has been under scrutiny for some time. It can be argued that it has strayed from its original purpose of protecting vulnerable family businesses, given that it is available to many large, well-established companies, such as some of those listed on AIM.
We do not know if Business Relief will be around forever, or if it will remain in its current form. It may therefore be worth triggering the relief now through a gift of assets to a trust or other structure for the benefit of the family and future generations.
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Make gifts
Gifting has always been a straightforward way of reducing a future IHT bill. Outright gifting keeps things simple and involves minimal cost and administration. Such gifts however provide no control or protection for the donor, which is something that has become increasingly important in these uncertain times.
Gifts to a trust or vehicle such as a Family Investment Company can however be very useful options for asset preservation and succession. The current relatively benign tax climate makes these options more affordable.
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Prepare a Will that is fit for purpose
Asset protection has become more of a focus than ever before. A simple, “everything to the surviving spouse, then to the children” Will may still be appropriate for some. In most cases however, structures such as life interest or discretionary trusts, together with an accompanying letter of wishes, provide maximum flexibility and serve to protect assets for future generations.
Most of the options outlined above are not new. However, as we navigate through these difficult times and question what the future holds, now could be a good time to future-proof your position so far as possible.
For further information, you can watch a webinar by Stephanie Mooney and James Ward for LexisNexis on "Succession Planning" which was released on 8 December 2020.
(Subscription to LexisNexis required)
Further information
If you have any questions about the issues covered in this blog, please contact a member of our private client team.
About the author
Stephanie Mooney is an Associate in the Private Client team. Stephanie’s clients include high net worth individuals, entrepreneurs, executors, trustees and individuals who lack mental capacity.
She advises on a broad range of matters, including:
• Lifetime succession and estate planning, often with a cross-border element;
• Wills;
• The administration of estates (probate);
• The creation of and administration of trusts;
• Powers of attorney; and
• Applications to the Court of Protection and other mental capacity issues.
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We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
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