Are Property Investors interested in ways to reduce IHT?

by Mark Alexander

11:10 AM, 13th December 2010
About 10 years ago

Are Property Investors interested in ways to reduce IHT?

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Are Property Investors interested in ways to reduce IHT?

I’ve raised this question is that it’s important to me.

Am I in the minority though?

I’ve insured my life and written the policy into trust to pay IHT without attracting further IHT.  However, this is going to get more and more expensive as I get older and my wealth grows.  I’ve also investigated various other schemes, most of which involve transferring the properties into a trust.  This is fraught with problems including CGT, IHT, stamp duty and financing.

I’m a member of a group of professionals called the Financial Strategies Group.  This includes a large IFA firm, a Will writing company and a Solicitors firm with a large private clients department.

The group believes they have found a way for property investors to escape IHT on every property they own, regardless of how much it increases in value by.  The scheme and the associated paperwork is now in the process of being settled by Council.

It’s not a simple process as it involves changing the structure of ownership and lot’s of paperwork to jump through the loopholes in anti avoidance legislation. 

I was invited into the group for two reasons.  1) I am a landlord and 2) I can help with distribution if /when the scheme is proven to be effective.  The group were very keen to ensure that the scheme ticks all the boxes for the vast majority of landlords, not just the super-rich who have properties with no mortgages.  Therefore, I’ve made it very clear that the scheme must not prevent landlords from selling and must not involve changing the structure of ownership to the extent that future refinancing ability is affected.

I can’t release details of the scheme structure until it has been settled by Council but a full explanatory document will be produced in due course.

In the meantime, my question is whether landlords are sufficiently concerned about IHT that they would pay up to £2,500 per property to avoid it?

By the way, it’s not our product. I wish it was though, I reckon they could be onto a winner. For what it’s worth, I think it’s pricey, but then again, so is IHT. If the scheme is settled by Council I plan to use it every time I refinance one of my properties.  That way the conveyancing will all be wrapped up in the £2,500 fee. I’ve also asked them to consider bulk discount. For a landlord with just 10 properties the fee of £25,000 is a big pill to swallow. 100+ properties and the numbers look very scary indeed.

I look forward to receiving your responses.

Regards

Mark Alexander.


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Comments

Michael Skinner

10:16 AM, 14th December 2010
About 10 years ago

Yes. I will be interested in learning more about the saving of IHT when the scheme is ready.

Maggie Dale

8:58 AM, 17th December 2010
About 10 years ago

Interested in the proposeal to reduce IHT but wil the costs involved will it be possible to proceed with say two properties a year out of my portfolio?

Keep up the good work!
Many thanks

9:04 AM, 17th December 2010
About 10 years ago

Hi Heather

Thanks for your interest.

We are still waiting for the scheme to be settled by Council at 5 Stone Buildings, Lincolns Inn so I can't comment for sure but I suspect the answer will be YES.

As soon as I know more I will post here, write a further article in Landlord News and also Tweet. You can follow my Tweets @IAmALandlord.

Regards

Mark Alexander

9:35 AM, 25th December 2010
About 10 years ago

Definitely interested in looking into this scheme when details available. I currently own three larger properties coverted to self contained flats,plus my own house and a number of other investments of a more modest proportion, the whole value exceeding current exemption limit.

Carol Wilson

12:43 PM, 1st January 2011
About 10 years ago

Hi Mark, I'm interested. And I'm curious about how the fee rate was calculated. I know you said that your insurance premiums are increasing as you age, and mine will do too. However they'd have to increase quite a lot to make £2500 per property look cost effective. That's approx 10 years of a £20 per month rise all in one go - much less palatable than the monthly increase on the premium - which by the way covers my entire portfolio not just one property - and to be fair that rise would almost double my premium so the amount of the rise feels unlikely.

14:33 PM, 1st January 2011
About 10 years ago

Hi Carol

Happy New Year.

There is no one size fits all, this scheme is simply another alternative to be considered as a financial planning tool. Insurance based IHT planning solutions are right for some people but not all people. If you would like me to introduce you to my recommended IFA firm for further advice on how insurance IHT based schemes are costed please email me your full contact details at mra@themoneycentre.com

Regards

Mark


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