Bypass Inheritance Tax as Laurence Llewelyn-Bowen does: Is it possible to transfer your property to your children at present?
Revamped Article
From the dazzling designs of Laurence Llewelyn-Bowen to the financial acumen behind his home ownership, let's dive into his innovative inheritance tax planning techniques.
Take a peek into the life of this flamboyant interior designer and TV host, who recently revealed that he and his wife, Jackie, have gifted an whopping two-thirds of their Cotswolds manor to their two daughters, their husbands, and their four young kids.
"I'm no longer the master of my domain," he quipped. Curious about how you can replicate this clever maneuver to lower your family's inheritance tax bill? We quizzed the experts!
What Did Laurence Do?
He divulged how his sprawling property — bought in 2007 — has been restructured into three distinct abodes.
Daughter Cecile, her spouse, and their two offspring reside in a converted garage block.The main residence has been split into two dwellings, according to The Sunday Times.Hermione, Laurence's other daughter, lives with her spouse and their two children in one portion.Llewelyn-Bowen and his wife occupy the remaining portion.
How Can You Cut Taxes?
From a law perspective, giving away your home is permitted at any time. However, it may still be subject to inheritance tax when you pass away unless certain steps are taken.
Julia Rosenbloom, a private wealth tax partner at Shakespeare Martineau, explains: "If you give away your home and still live in it, HMRC considers it not a genuine gift, and the inheritance tax still applies."
To sidestep this issue, consider two primary options:
- Multiple Dwellings: Divide your property into independent residences, just like Llewelyn-Bowen appears to have done. Then, part with the dwellings you no longer inhabit. After seven years, these properties should legally cease to be part of your estate for inheritance tax purposes. However, you'll need good advice and proper planning to ensure that this adheres to the rules, including having separate living quarters with their own entrances, kitchens, and bathrooms.
- Renting: Split your property into multiple residences and gift all of them to your family. Then, rent the dwelling you continue to occupy from the new owners. Note that the owners will need to pay "income tax" on the rent you pay them.
Additional Strategies
Alas, splitting property might not work in many cases. In such scenarios, other options might include giving a portion of the property to your adult children, while the gifted portion falls out of your estate after seven years. Consult with a financial advisor for tailored advice that suits your needs.
One caveat: if you gift to your sons-in-law, as Laurence did with his daughters, be mindful of potential risks like property sales or divorce that could disrupt your wishes. It's essential to put protective measures in place to safeguard your interests and those of your heirs.
- Investing in property and then restructuring it into multiple dwellings, as Laurence Llewelyn-Bowen did, could help reduce inheritance taxes by making the unaoccupied dwellings legally cease to be part of your estate after seven years, provided you seek financial advice and proper planning.
- Pensions and mortgages, in addition to property, are important aspects of personal-finance and lifestyle that can significantly impact home-and-garden endeavors, as well as business growth.
- Seeking professional financial advice is crucial when it comes to minimizing inheritance tax to ensure a comfortable lifestyle and legacy for generations to come, as demonstrated by Laurence Llewelyn-Bowen's ingenious inheritance tax planning techniques.
- Giving away a portion of your property to your adult children can help reduce the overall inheritance tax, but it's essential to consider the associated risks like property sales or divorce, as well as put protective measures in place to safeguard your interests and those of your heirs.
- In certain situations, it may be more feasible to lease a dwelling you continue to occupy to the family members who have received the gifted property, as this could also help minimize inheritance taxes, but it's crucial to understand the implications of rental income for all parties involved.
