How do you transfer shares to relative?

themachine_2

Hi,

An elderly relative of mine has a number of shares valued at around £60,000 (all in the same company) which she would like to gift to me, however i have no experience in shares whatsoever and don't know where to begin.

From the research i have done i understand that there may be CGT implications and am looking for advice on the most efficient way to transfer/sell these shares. I don't mind paying for advice on this matter but, again, i don't know who best to contact - HMRC, accountant, etc.

Many thanks.

alanq

Are the shares held in a nominee account or in the form of certificate(s)?.

themachine_2

They are in the form of certificates.

Keep_pedalling

Some advise would certainly be wise especially for your relative. CGT could be an issue that could easily be resolved by splitting the gift over more than one tax year to take advantage of her annual allowance.

If she has few other assets then the issue of deprivation of assets could affect her if she needed care in the future.

Most of the gift would still count as part of her estate if she dies within 7 years of giving you these shares, so if her estate is likely to be subject to IHT it could effect other beneficiaries of her will as the tax would be payed from the remainder of the estate.

An independent financial advisor should be able to advise.

themachine_2

I would be the sole beneficiary of her estate given that she never married or had children and am her only living relative.

It seems to be a very complicated area for me to understand and therefore it would be worth seeking professional advice on this. The only question i have is who would be best to approach?

Thanks.

xylophone

http://societyoflaterlifeadvisers.co.uk/

Your relative might find a suitable adviser through the above.

grey_gym_sock

the mechanics of transferring a certificate would be for your relative to send the certificate(s) to the company's registrar, with instrutions (e.g. in a covering letter) to issue a new certificate in your name (and for your address). say that it's a gift. or, to transfer only some of the shares at a time, say how many are to be transferred (and the registrar will send a balance certificate to your relative for the rest). the registrar won't charge for any of this.

note that replacing lost certificates is expensive, so it may be worth sending certificates via a delivery option that includes some insurance in case they're lost.

also, check who the current registrar is on the company's website, as it's possible that it's changed and on the certificate it has the old registrar.

Keep pedalling has mentioned the 3 possible related issues: CGT, inheritance tax, & deprivation of assets.

deprivation of assets is only relevant is it is already apparent that your relative will need care, and the gift will affect his/her ability to pay for it.

on inheritance tax, a gift of shares won't usually increase the eventual IHT bill, but it may fail to reduce it. apart from a £3,000 exemption for gifts in each tax year (and the previous year's exemption can be carried forward if it wasn't used - but nothing further back), then the rest of the value of the gift is a "potentially exempt transfer" (PET), which means that if your relative lives for 7 years after the gift, then it's exempt from IHT. otherwise, the PET is added back into the value of the estate when calculating IHT. which may make the IHT bill about the same as if there had been no gift. records of the gift should be retained, for use in IHT calculations.

when giving shares, your relative is treated as having made a chargeable gain on the difference between the value of the shares at the time of the gift and what she paid for them. the first £11,100 of chargeable gains in the current tax year are covered by the annual allowance, the rest is taxed at 18% or 28%.

so if £60k of shares cost £50k, the gain is £10k, and is covered by the annual allowance. but if they cost £20k, then gain is £40k, and £28,900 is not covered by the allowance, and tax will be payable on that.

if there are no good records of what was paid for the shares, then this becomes more difficult, of course.

no CGT is payable for assets held when you die, so lifetime gits can result in CGT being paid which wouldn't be paid if they were kept.

themachine_2

Thanks Gym Sock.

Although i haven't yet looked closely at the certificates i believe my aunt has had these shares for over 20 years. They are shares in a company she worked at for over 40 years and she tells me she paid only 25p for some of them. Today they are worth about £5.80 each and she has just over 10000 shares.

Would there be any difference in her selling £11000 worth of shares each financial year herself and then transferring the cash to my account if she so wished?
Or if she transferred some of the shares to my name each year would i then be able to share the CGT between myself and my husband?

grey_gym_sock

selling £11,000 worth of shares and then giving the cash has the same effect for CGT as just giving £11,000 worth of shares. as you're probably thinking, if the value of the shares is less than the CGT allowance, then the gain must be less again, so in that case you don't need to know what the original cost of the shares was.

transfers to your husband don't help with CGT, because the CGT is the liability of the donor (your elderly relative). it's the donor's CGT allowance which is being used, not the donee's.

Keep_pedalling

She can sell more than £11100 a year it is the value of the gain that is important, although from what you say on some of these most of of the current value is gain so it won't be that far over that value.

She could sell say £12000 worth each year and give you the cash which has the advantage that £3000 is IHT exempt (£6000 this year if she did not use last years allowance up). If she has not used any of her ISA allowance up she could also transfer some of the remainder into an ISA, which protects them from CGT.

To find an IFA in her area try https://www.vouchedfor.co.uk/