Careful planning for inheritance tax mitigation
After the death of their father, a UK family with an extensive property portfolio asked to consider ways in which their estate could be restructured to mitigate a potential tax levy.
Although their mother had inherited the entire portfolio, she was in poor health and the family risked losing 40% of their assets on her death.
- As the portfolio was transferred under ‘spousal exemption’, there was no uplift in base costs on death. We proposed transferring the property portfolio into a limited liability structure in order to defer a crystallisation of the latent capital gain in the portfolio.
- We partially restructured the portfolio to take into account the significant rent roll and reduce the impact of the 50% income tax from 2010 through internal debt funding arrangements.
- The family was now able to utilise the available domestic exemptions and gain sufficient structural flexibility to mitigate additional transfers of the portfolio.