Private Client Team

• Ian Bradshaw - Head of Private Client Department
• Clare Jeffries - Partner
• Diana Rawstron - Consultant

download

Make the Best Use of Falling Asset Values - Part I

OCTOBER 2009

Around the beginning of 2008, share prices and property prices were standing at an all time high.  In many cases they are now 50% lower.  While this will generally be seen as “bad news”, particularly for those who need to realise the asset, there is an advantage in terms of lifetime giving.  It means that more assets can be given away without exceeding the nil rate band for inheritance tax which is currently £325,000.00.

For example, shares in Royal Dutch Shell plc had a value of £4.70 per share in May 2007 and so around 63,000 shares could be gifted without exceeding the nil rate band which was then £300,000.00.  At the beginning of May 2009, their share price was around £3.40 so approximately 95,000 shares could be given away.  A similar comparison could be made with investment properties.

If you believe that the assets are going to increase in value in future, then these are particularly advantageous assets to give away while standing at a low value.  This is for two reasons:-

1. If you make an outright gift then there would in any event be no immediate inheritance tax.  However, if you die within 7 years of making the gift, it is the value at the date of gift which is brought into account for inheritance tax and not the (increased) value at the date of your death.
2. If you are making a gift into trust, then almost any transfer into trust is now immediately chargeable to inheritance tax where the value of the gift exceeds your available nil rate band.  Far more assets can be put into trust without giving rise to an immediate inheritance tax charge while assets values are low.

Large gifts must of course be contemplated in the context of overall financial planning and making sure that you are not depriving yourself of assets to which you may in future want access in terms of either income or capital.  However, this is a good time to consider whether lifetime gifts are suitable for you.

If you would like any further information about the issues raised in this article please contact Clare Jeffries or any other member of Goodman Derrick LLP's Private Client department on 0207 404 0606.

This guide is for general use and information only and should not be relied upon as providing specific legal advice.