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COVID-19: inheritance planning and gifting

There could be a silver lining in the stock market crash for individuals who want to transfer assets to their dependents, as the lower valuations will have reduced the tax cost considerably, private wealth law firm Boodle Hatfield has advised.

Some individuals may have been deterred from gifting assets in the past, as it can crystallise a high Capital Gains Tax charge that they would have had to pay when they gift the asset.

However, the economic impact of COVID-19, could mean that many assets may have fallen in value and therefore, subject to less CGT. Even if the shares subsequently rise in value, the IHT bill on those shares is based on the share price at the point they were gifted.

Lifetime gifting is the best tool to reduce Inheritance Tax bills. There are currently no limits on the amount that can be gifted, meaning any money given to a family member is free from IHT, as long as it is given seven years before the individual passes on.

Geoffrey Todd, a partner in the private wealth team at Boodle Hatfield, commented: “With IHT rates still standing at 40 percent, it’s important for individuals to think about inheritance planning and gifting should be a key part of those considerations.”

Mr Todd added that as asset values fall due to the stock market drop, individuals should give away these assets and take advantage of reduced CGT bills.

“Now is a good time to consider restructuring your portfolio and passing assets down to future generations. The tax benefits of gifting may be not always be as generous as they are now,” Mr Todd said.

24 April 2020

This article first appeared in eprivateclient. Find our more about our Private Wealth services or visit our COVID-19 Hub for more updates.

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