Estate planning opportunities in volatile markets

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The fall in financial markets over the last few months is proving to be an opportunity for those looking to pass on wealth tax efficiently to the next generation. More people want to make gifts within their lifetime, so that they can see the impact this has on their family members’ lives.

By gifting assets when markets are low, you can move more shares out of your estate, and any future growth will form part of your beneficiary’s estate instead.

Gifts totalling less than £3,000 a year fall within your personal annual gift allowance, meaning that there is no inheritance tax to pay. If you have not used your allowance from the previous tax year you are able to carry this forward. This means that a couple could gift up to £12,000 between them in a single tax year without having to pay any inheritance tax, assuming they have not used last year’s allowance.

Gifts larger than £3,000 that are made to individuals will escape inheritance tax completely, if you survive 7 years from the date of gift. If you were to die within 7 years of making the gift, it will form part of the calculation for inheritance tax on death.

The Capital Gains Tax implications of giving away assets are often overlooked. Gifting is considered as a disposal; therefore, you could be liable to pay Capital Gains Tax on any growth since you purchased the asset. Similarly, if the asset has decreased in value since you purchased it, you can use this loss to offset against future taxable gains.

Before making a gift it is very important that your own income and retirement needs are met. Furthermore, the tax implications of gifting larger amounts can be very complex, and advice should always be sought to ensure that you are fully aware of all possible tax and personal implications.

Please do get in touch for an initial complimentary discussion if you are thinking about gifting some of your wealth.

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