Poa, cgt & iht

Apodemus

Sorry for the alphabet soup thread title!

I have Power of Attorney for an elderly relative. POA includes provisions to make IHT decisions and I will be both executor and one of the beneficiaries on death, which is statistically likely to be less than 7 years away. Elderly relative pays tax at 40% rate, has pensions that more than meet his care home costs, and his stockbroker makes maximum annual use of both ISA transfers and CGT allowances.

While most of his investments are under discretionary management by a private client stockbroker, he has a few individual holdings in investment trusts that are in his own name.

I would have liked to simplify things by selling these individually held holdings, but if I do this, he will have to pay CGT at 28% and the cash would then attract 40% IHT on death. If they remain invested, the estate is more complex, but the proceeds would only be taxed once, at 40% IHT.

What other options are there? Can I transfer them to the main portfolio without realising the capital gain? Can I make an IHT transfer now to beneficiaries (by dividing and transferring the shares in the Trusts), on the basis only of a future IHT liability or would that also trigger a current CGT charge?

Anything else to think about?

Mistermeaner

Don't know but from sounds of it your relative has some form of existing advisor in this area so can they not assist?

Apodemus

Thanks for responding. His broker can offer advice related to his portfolio or any additional funds that I add to it. He should be able to tell me if I can transfer in any external holdings. But he can't offer wider financial advice or he would be straying beyond his professional boundaries.

I guess most questions on here could simply be answered by "ask a professional" but this forum is really good at providing a range of answers that help people to think beyond their existing narrow range of knowledge and be better able to ask the right questions and engage fully when they are given professional advice further down the line.

Apodemus

IanManc,

Thanks, I really want to make sure that I do everything correctly and as you point out, the number one priority is the welbeing of my relative.

The relevant clause of the POA states:

"....to engage in Inheritance Tax planning on my behalf including without prejudice to the said generality to make gifts of my property and assets of whatever nature and wheresoever situated to any of my children or remoter issue..."

Do you think I am interpreting that wrongly?

Apodemus

Thanks for your well-considered and thoughtful response.

You are probably correct about getting professional advice, although the situation is not quite as complicated as it might seem. There are only two of us that are named in the will, we are both executors and we both share the POA, so nothing would or could be done without us both agreeing.

I handle all the routine stuff (keeping full records of everything) and file the tax returns, so I guess I have a vested interest in simplifying his financial affairs - I'll make sure that doesn't cloud my judgement.

Thanks again!

cloud_dog

Hi.... Aren't you able to simply transfer the registration of the ITs in to private client stockbroker? ITs are after all investment companies traded on the stock exchange.

The stockbroker could then deal with disposal / CGT etc, etc as they currently manage.

Apologies if this simplistic comment soooo naive