How can I pass on my property portfolio to my children?
Question A landlord has built up a decent portfolio and is reaching an age where he wants to take a back seat and pass it on to his children. What is the most tax efficient way of doing this?
There is no easy way to make this transfer, especially after the last budget (2004) changed the rules on hold-over relief.
One method that can be used is to mortgage up to the hilt on the properties, and then gift the cash so raised to the children. This will reduce the taxpayers estate on death provided the taxpayer survives seven years, with the property value being uplifted to market value at the date of death and IHT being payable on only the net value of the properties.
Consideration could also be given to setting up a form of trust, but the usefulness of such arrangements has been restricted by changes in the budget and the raising of the trust rate to 40%.Care should be taken in implementing any scheme in this area as there is a large amount of anti-avoidance legislation designed to stop transfers being taken outside the tax net in this area.
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