Time to act on succession plans

Now may be a good time to transfer assets and/or family owned businesses to the next generation and avail of the potential tax benefits arising from reduced property values and current tax reliefs.

There is a concern that the current capital gains tax and gift/inheritance tax reliefs associated with transferring assets to the next generation will be curtailed or eliminated in the next Budget, due in December 2011. Considering that today’s property, business and share values are generally low, the likely reduction in tax reliefs in December and a possible increase in the capital taxes rate of 25 per cent, now may be a good time to reassess your succession plans and take advantage of the current tax system.

Current Benefits of Lifetime Transfers

The making of gifts now to the next generation and intended beneficiaries, as opposed to on death, may be advantageous for the following reasons:

Where certain conditions are satisfied on transfer of business, company shares, land, residential and commercial property, it is possible to reduce the current capital taxes rate of 25% to 2.5 per cent, or nil in some cases. Reliefs connected with these property transfers may be restricted or abolished in the next Budget.

The current lifetime gift/inheritance tax thresholds may decrease further and the current 25 per cent tax rate may increase to 35 per cent or higher in the near future.

The value of most businesses, company shares and land together with residential and commercial property has fallen which means that the tax burden associated with transfers of those assets to the next generation may have significantly reduced.

Owners of small private or family run businesses may wish to pass all or part of their business/assets to their children or intended persons but retain control over those assets. Lifetime transfers can ensure that you retain the sometimes necessary control and association to the business/company while at the same time enabling the next generation develop their own skills and experience.

Proper planning can help you make provision for your retirement through pension funding, share buybacks, loans to the business/company, golden handshakes and/or future earnings.

Any future increase in the value of assets or in private businesses gifted now would accrue to the children or next of kin and not form part of the estate.

What should you do next?

With time running out for accelerating succession plans and availing of possible tax reliefs prior to the next Budget, it is a good time to discuss your particular circumstances with a professional tax advisor to ensure that suitable measures for passing wealth are tailored to your needs and requirements.

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