The Gazette 1982

JULY/AUGUS T

1982

GAZETTE

4. insurance on the testator's life by a spouse or other beneficiary — but remember that the premiums must be paid from the income of the spouse or other beneficiary or, perhaps, with the assistance of small annual gifts; 5. a bequest or gift of up to £10,000 to the spouse of any beneficiary; 6. when dealing with nephews or nieces, it may be possible to arrange that the nephew or niece will become "a favourite nephew or niece", having worked wholetime for the testator for a period of five years prior to taking the gift or inheritance; 7. when benefits are given to a grandchild, it should be remembered that, where the grandchild is the child of a deceased child and is also a minor, he has the same threshold as a child of the testator; in all other circumstances, a grandchild is entitled to an exempt threshold of £30,000. It will be seen that the legislation offers — indeed, is clearly intended to offer — considerable scope for the mitigation of the burden of taxation upon the passing of property from one generation to the next. Although this article has not dealt extensively with the uses of the discretionary trust, such trusts have an obvious social importance in cases where a testator leaves infant children or a child suffering from some disability. For such trust to be attacked by government and revenue alike, as being mere vehicles of tax evasion, is to miss a fundamental social point; any such attack must be resisted strenuously. But, discretionary trusts apart, the simple fact remains that everybody having any property whatever to pass on to the next generation, whether of the farming community or not, should make a will. •

mere 70 acres (without stock or machinery) would have resulted in a liability to Inheritance Tax. The combination of reduced land values and increased relief for agricultural value have dramatically changed the position. The problem for a testator, however, is to try to predict the values at date of death; it is because of this difficulty and risk that a transfer to part (this can be either a transfer of an undivided share, as a tenant in common, or an absolute transfer of a specified area) can make very good sense as a hedge against any future inflation. This, of course, raises other issues, such as partnership with the Successor, stamp duties on the transfer, the maturity of the Successor and the needs of other dependants. While these are matters which should be faced discussed and considered, the completion of a suitable will should not be deferred because of any uncertainty about future values, or while inter vivos arrangements are being considered. Rather than run the risk of a death intestate, the farmer should certainly consider making even a "holding" will, in comparatively simple and straigh- forward terms, in order, at least, to take maximum advantage of whatever exempt thresholds or lower rates of tax are available under the C. A.T. Act, which could be followed by whatever combination of dispositions, inter vivos and by will might be best suited to the circumstances. The objectives mentioned above can be acheived in a number of ways. In the case of an elderly testator, he can with his wife's concurrence (by release of her legal right) devise the farm direct to the Successor, subject to rights of residence, maintenance and support for his wife and subject to any appropriate charges in favour of other children. A young testator, on the other hand, would be well advised to make a substantial bequest in favour of his wife and create a discretionary trust for the benefit of any children or, perhaps, for the benefit of both children and wife; a simple example of this would be to leave an undivided moiety of his estate absolutely to his wite and to settle the other undivided moiety upon discretionary trusts for the children, with power of appointment to his wife or trustees and with the ultimate intention that the farm would pass to the Successor through the joint operation of the devise to his wife and the exercise of the power ot appointment, respectively. In a compromise situation, the testator might simply leave his property equally to his wife and the Successor with, or subject to, suitable provision for any dependant children. Other possibilities which should be kept in mind to avoid, reduce, or make provision for liability tor Inheritance Tax include:— 1. the making of small gifts, not exceeding £500 per annum; 2. making a gift, rather than an Inheritance, because Gift Tax is charged at only 75% of Inheritance Tax, unless the donor dies within two years of making the gift; 3. the surrender of Government Stock to pay tax; this can be very useful for a person who holds stocks and shares — the transfer, while alive, of some of his investments into appropriate Government Stock can provide very substantial savings;

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