Inherited HSBA shares

Firefly_777

Hi all!

Just need a sounding board, really.

Unfortunately, my grandmother died last year. She left me a considerable inheritance. And a part of that inheritance is just under £150k worth of HSBA shares (when she passed they were worth around £80k). I was pretty shocked when I had looked at the share price recently as I didn't think to look.

I haven't submitted a form of intention yet (waiting on another party's decision). I have just created a memorandum of appropriation with other beneficiaries as a way of using our own CGT allowances (£12k) instead of just the estates measly £3k.

I was thinking of selling 95% and transferring 5% into my name. My reasoning is keeping 150k in the same stock would make me feel uncomfortable - too risky.

Maybe it is silly transferring/keeping the 5%? I guess my reasoning for this is to defer the CGT to another tax year (and 5% is probably the amount I feel comfortable keeping in one stock).

I was thinking of adding an amount into my old workplace pension (maybe 20k - might reduce CGT a bit). Current workplace pension is with NEST (relief at source) so I don't want to add to that (funds are terrible).

Some more information about me... my salary is £40k per annum. I am 40 years old. Other inheritance assets are around £150k in life assurance bonds (already being sold). A flat that will have a CGT gain when sold, but I am not sure how much - maybe £25k for my share (hopefully this will be sold next year). There is some cash too.

Are there any better ideas? Curious to know what you guys think.

poseidon1

If I understand correctly the estate has around 10,400 HSBC shares ( at Friday's closing price), and there is an informal appropriation document vesting around 2,600 shares in your own favour.

You are proposing selling 2,470 shares realising a gain of around £16,500 compared to a total gain of around £17,490 if you sold the lot.

Frankly holding back a mere 5% of the shares to avoid CGT on around £1,000 gain doesn't make much sense to me unless I am way out on the numbers involved. Especially makes no sense where a proportion of your gain pushes you into higher rate tax for this tax year and a resulting 24% tax rate thereon.

If you are married, there is also your wifes CGT exemption and her 18% CGT band to consider in offloading some of the gain attributable to you.

However if not married seems to me either sell the whole lot and be done with it, or retain nearer 50% of the shares to make better use of next year's exemption.

Incidentally, you mention there is also an insurance bond being sold. Are you aware that selling that within the estate triggers an automatic 45% income tax bill on the bond gain? Are you also aware this could have been mitigated/ avoided by assigning bond ownership to 4 beneficiares (and spouses if any)?

Spouses can generally be useful in mitigating taxes on taxable estate assets by using a combination of deeds of appropriation and memorandum of gifts (between spouses). Of course best to understand the sale proceeds do legally belong to the spouses involved if using that strategy.

Mands

https://forums.moneysavingexpert.com/discussion/6685600/inherited-hsba-shares

Is keeping 5% really about mitigating the CGT or is there another element at play here?

My portfolio is appallingly unbalanced. I acquired some shares some time ago and there is no open market on which they can be sold. There is a very occasional option to sell them to other shareholders. At some point it will make financial sense for me to do that, over and above the re-balancing issue.

But I may well continue to keep a small holding. Like your 5%. Not because it's the right solution financially but because those shares represent an important chapter of my life and I would be sad to let it go entirely.

If there is anything like that in your thinking then it would be helpful to know that. If keeping the 5% is actually about maintaining a link to your grandmother's investment history then no amount of CGT calculations are going to help.

Firefly_777

https://forums.moneysavingexpert.com/discussion/comment/82158398#Comment_82158398

Sorry I probably wasn't clear! My share is around 10,000 shares (the estate had around 20,000 shares - unequal split).

I'm not married - have a partner but not married.

The life assurance bonds ended on her death (chargeable event certificates match her date of death). So as far as I was aware, they should be taxed using my grandmother's earnings for the year. Well, I hope so, I did a lot of research. I used top slicing relief, too (mind you, I haven't had anything back from HMRC yet - they have been very slow in responding).

Firefly_777

https://forums.moneysavingexpert.com/discussion/comment/82158446#Comment_82158446

I guess there is a bit of a sentiment reason to keeping it. I wouldn't purchase those shares for myself if it was my own money.

I would okay with an unbalanced portfolio as long as it was a bit diversified.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82158482#Comment_82158482

So your portion of the shareholding is worth £150k with a £70k taxable gain?

In which case the 5% shareholding is worth £7210 so looking to avoid cgt on that if sold in the next tax year.

It appears to be a more meaningful sized holding to hang on to, at least for the short term until the new tax year.

On the assumption you have been using your ISA allowances for other stockmarket investing, you might want to consider the possibility of 'bed and isa' for this rump of HSBC shares in the new tax year to hold longer term as part of your portfolio. Was good enough for your grandmother, so could be a useful part of your own portfolio.

I note the bond matured at date of death so it is indeed a pre-death income tax liability in this instance.

Firefly_777

Yes my portion will be around £150k (with approximately just under £70k gain).

I could potentially hold onto more to the new year - the only thing is there will be CGT on her flat (but I don't know exactly how much - but it is likely to be sold in 2027 though I cannot guarantee).

Thanks for confirming about the bond - I have checked many times during the course of sorting everything out - it is very complicated.