Minimising inheritance tax on family assets
- Cultural gifts scheme can work for pre-death planning.
- An asset gifted to charity does not have to meet pre-eminence criteria.
- Acceptance in lieu scheme to meet death duties.
- Public access requirement for the conditional exemption.
Heritage assets can form a significant part of a family’s wealth, particularly if items have been passed down between generations. It may be taken for granted that those items can continue to devolve to younger family members for years to come.
What can be overlooked, however, is that there will usually be an unwelcome inheritance tax (IHT) bill which the family may not be able to afford to pay without selling other assets.
If assets are sold or given away during the owner’s lifetime to avoid estate taxes, there is capital gains tax (CGT) to consider. Tax traps appear at every turn, but with careful planning, these can be mitigated.
There is no statutory definition of “heritage assets” but by this term we mean objects which have national, scientific, historic or artistic importance. Examples of such assets include works of art, books and manuscripts, historic houses, and land and buildings.
Heritage assets are not automatically exempt from IHT and CGT just because they are important to the nation. If no planning is carried out, a heritage asset is subject to IHT on death in the normal way: 40%, subject to any exemptions, reliefs and the nil-rate band.
If the item is valuable, the tax will be ...