Inheritance Tax advice
 

Hi
Just thought someone on here may have experience of the following scenario:-

My dad is planning his exit strategy (so to speak) regarding paying as little inheritance tax as possible.

He is over the threshhold in uk (340k) and has a property in Los boliches worth around 230 000 E, He has asked me the son to find out what his best strategy is.

I think as he is a Uk tax payer, resident in uk he would need to dispose by signing it over to his kids ,and as long as this is 7 years before death it should be taken out of his uk tax bill. What do you think?

Any suggestions

Regards
LPH:thumbup:

Re: Inheritance Tax advice
 

If you are subject to UK inheritance tax you can't frustrate that by giving away the house that you continue to live in. Other than that, handing over assets in the way you suggest is tax efficient though not necessarily the right solution for someone who will need money to live on till demise. He only needs to give away enough to get below the IHT limit.

Re: Inheritance Tax advice
 

Hi

It is efffectively what I did; my house is in my childrens name albeit bought with money I "gave" them. However I bought an usufruct.

I went to Blevins Franks to get the full SP - best money I have ever spent

Davexf

Re: Inheritance Tax advice
 

The problem in Spain is that if you change ownership of a property it is normally considered as a gift.

Unlike the UK where gifts are not taxed if the giver survives for 7 years, in Spain the gift is taxed immediately at the time of the gift at the full IHT rates.

When you are involved in IHT planning professional advice is essential.

I agree with Dfx - Blevins Franks are worth contacting. I have not used them personally but I have the highest regard for the advice they offer and for the info given in their publications.

Re: Inheritance Tax advice
 

I agree with Fred on his first point. IHT is so complicated in Spain you should seek professional help.

As to using Blevin Franks though I am not so sure.

I recently contacted them for some financial advice and IHT planning and sent them chapter and verse details of my situation. I am quite switched on financially but belive in using specialists in the field.

The quote I received back from them to prepare a report without any guaranteed advice let alone any tax savings was well over £1,000 + VAT and that was up front before they even started work.

I have since discovered through my own endeavors that any tax savings that I would make would be less than their fee.

It appears to me that if it is not worth their while BF price themselves out of the work rather than provide a service. This has been corroborated by other financial advisors with whom I have corresponded including an ex employee.

BF are a well recognised company who produce some good literature, but IMHO they are not for the common man, only for large organisations who can afford them.

Re: Inheritance Tax advice
 

Under UK law, another issue to consider is that giving a property away may trigger a capital gains tax liability, as far as I know. He should be getting professional tax assistance with this plan.

Holding onto the asset does give rise to IHT which people notice, but they never notice the waiver of capital gains tax.

There may also be a Spanish CGT or inheritance/gift tax issue to consider if the property is gifted.

Re: Inheritance Tax advice
 

Can anyone give me advice on inheritance tax on a small property worth 75.000
euros It is left to my three children.aged 36-44ys We have been hearing horror
stories of it rising to 80%.We have lived in spain for 10 years and but have never applied for residency and are wondering now if it would be beneficial.
any advice would be gratefully accepted

Re: Inheritance Tax advice
 

To help reduce the Spanish succession tax, you MUST be resident (tax resident as well) and be leaving the property to resident offspring.

If you have not completed tax returns in Spain then you're in the 'do-da'.

If your children are not resident here then they will not get any of the (substantial) tax breaks.

In addition, you will be liable to UK IHT. Hence, I suspect, the figure of 80% tax!

You don't say where you live - this is an important factor as Spanish Succession Tax is very regional with, for example, the Valencia region giving up to 99% relief if the estate is passed on to resident family members.

Re: Inheritance Tax advice
 

Each of the children would be liable for about €800 in tax.

Each child (even if non resident) gets an allowance of €16k to be deducted from the value of their individual inheritance so the amount liable for tax would only be €9000.The tax rate at that level is about 8%.

The tax can rise as high as 80% if you leave over €800k to a non relative who is worth over 4 million euros - not very likely in your case!

If you have lived in Spain for 10 years you should be tax resident by default assuming you have been submitting annual income tax returns.

As Snikpoh says, there are additional allowances in certain regions for tax residents.

Re: Inheritance Tax advice
 

Thank you for your time,greatly appreciated.

Re: Inheritance Tax advice
 

Perhaps one of the better options for your father to consider is to Create a UK registered company that becomes the legal owner of the house. The company appoints a number of Directors & Shareholders who simply take ownership of his shares when he passes away. There is a cost to create the company, and then a small yearly fee to submit returns to UK companies House, but other than that the IHT savings can be quite significant. Another bonus is that in some cases you can offset travelling, Maintenance and running costs for the property.
This article explains about how to avoid spanish inheritance taxes - http://www.tumbit.com/blogs/744-avoi...nce-taxes.html

Re: Inheritance Tax advice
 

The companies that do this charge in the order of £3000 +£700pa for the paperwork and in this case the value of the inheritence is so low that 3x€800 is very good value. Worth looking at for high value properties but not in this case.

Re: Inheritance Tax advice
 

The UK company route is certainly worth looking at where you are purchasing a property as in addition to the potential saving in IHT, if the sellers are willing to gift the property into a UK company with them as the shareholders and then sell you the shares, some of the purchase costs can be reduced. The company in the earlier link undertake this service including negotiating with the sellers. As you say though probably not worth it in the OP's case and you have the costs of annual accounts to take into the equation as well.

Re: Inheritance Tax advice
 

I would second the advice to avoid BF. They sold me a sure fired investment 10 years ago that is worth 85% of its value now and have charged me an annual fee each year plus a fee for the trust fund that administers it. They are now no longer replying to my letters.

Re: Inheritance Tax advice
 

I may be missing something, but I can't see from their website how Blevins Franks are regulated in Spain ? - I can see that they are FSA in the UK, but I would have thought that they would have been DGS or CMNV regulated here in Spain ? - could you appeal to the FSA ?