Q&As

A married couple (A and B) wish to leave their estates to each other on the first death and then to their children (C and D) on the survivor’s death, but A and B both own shares in a company and each want their shares eventually to pass to specific children. What are the implications of A leaving their shares direct to C and B leaving their shares direct to D (rather than first to spouse)?

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Produced in partnership with Paul Davies of Clarke Willmott
Published on LexisPSL on 31/07/2019

The following Private Client Q&A Produced in partnership with Paul Davies of Clarke Willmott provides comprehensive and up to date legal information covering:

  • A married couple (A and B) wish to leave their estates to each other on the first death and then to their children (C and D) on the survivor’s death, but A and B both own shares in a company and each want their shares eventually to pass to specific children. What are the implications of A leaving their shares direct to C and B leaving their shares direct to D (rather than first to spouse)?

From an inheritance tax (IHT) perspective, much will depend on whether the shares qualify for relief from IHT as business property and/or agricultural property.

If the property does not qualify for relief, then when the first spouse dies it is probably better for their shares to be left to the surviving spouse, to take advantage of the spouse exemption. The shares will benefit from a tax-free uplift in value for capital gains tax (CGT) purposes, and the surviving spouse then has the option to make a gift of the shares with a view to mitigating the IHT that would be charged on the shares on their death. To avoid a gain being made by the surviving spouse, some care needs to be taken to ensure the shares given away by the surviving spouse are ‘matched’ for CGT purposes with the shares inherited from the deceased spouse. One way would be for the surviving spouse to give the shares pursuant to a deed of variation that includes a statement that the provisions of section 62(6) of the Taxation of Chargeable Gains Act 1992 will apply

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