Insurance News Archive

Overseas property investors 'should take IHT action'

Those with second properties overseas are being advised to take action to minimise the inheritance tax (IHT) obligations of their offspring.

According to wealth management law firm Moore Blatch, people in their 60s and 70s with holiday homes or investment properties abroad should give their home to their beneficiaries now and pay them the commercial rent to use it.

Doing so could get rid of all IHT liabilities on the property, providing the owner survives for seven years after passing the home on.

Andy Kirby, senior tax and trusts manager at the company, commented that it is difficult to avoid IHT requirements on property as it is impossible to give away bit-by-bit.

"However, by setting up a suitable trust, all the IHT can be saved ... and there is no pre-owned asset tax as a rent is paid for the use of the asset," he said.

"The rental income stays with the beneficiaries so the tax-man's cut is effectively wiped out."

IHT is currently charged at a rate of 40 per cent on the value of any estate above £312,000.

So if an estate were worth £400,000, 40 per cent of £100,000 - or £40,000 - would be demanded by the treasury.

26 Aug 2008