Tag Archives: family
How To . . . Minimise Inheritance Tax
http://www.ft.com/cm…l#ixzz2hyRHU65O By Lucy Warwick-Ching Few taxes are quite as emotive – or as politicised – as inheritance tax (IHT). In 2007, George Osborne, the chancellor, promised he would “take the family home out of inheritance tax” by increasing the nil-rate band to £1m. He was promptly accused of “betraying ordinary families”. But as property prices rise, so too do receipts – the Treasury expects to collect £3.3bn in the 2013/14 tax year. And far from increasing, the nil-rate band is set to remain frozen at £325,000 until 2018. IHT is payable at 40 per cent on the value of an estate over that tax-free nil-rate band. However, according to unbiased.co.uk, more than £472m could be saved each year through careful IHT planning. FT Money explains how to cut the amount you pay to HM Revenue & Customs (HMRC). ——————————————- Make a will This is the first step toward avoiding IHT. “If you die without making a will, known as dying intestate, your assets are distributed according to statutory rules and this may result in a higher IHT bill than might otherwise arise. Plus, the intestacy rules might not fulfil your actual wishes,” says Julia Rosenbloom, an associate tax director with Smith & Williamson, the accountancy and investment management group. “With thoughtful tax planning you can pass on assets to family members more effectively,” she says. www.willwriters.com www.ipw.org.uk ——————————————- Transfer your assets Andrew Cameron, a private client lawyer and partner at Charles Russell, says all transfers between married couples and civil partners are exempt from inheritance tax. In terms of transfer to other people, any amount can be transferred or given away free of tax provided the donor survives for another seven years. However, it is important to note that the person giving the assets away cannot retain any interest in the assets. For example, if you give your house to your children, but continue to live there without paying a market rent, then the house will remain in your estate for IHT purposes. Also, keeping proper records of transfers is essential. www.charlesrussell.co.uk ——————————————- Donate to charity Since April 2012, estates that leave 10 per cent or more of their total assets to charity pay a reduced 36 per cent IHT on the remainder of the threshold. “The savings on the tax can fund the charitable donation so this could be particularly worthwhile if you want to make charitable donations anyway,” says Ms Rosenbloom. www.cafonline.org/legacies ——————————————- Set up a trust If you want to make a gift for tax planning purposes but do not want the beneficiaries to have the asset now, you could use a trust. Once the gift is made, any future growth is regarded as outside the estate for tax purposes. There are two main types of trust. Discretionary trusts are governed by trustees, whereas fixed trusts allow one or more people to receive the income, but the capital is held in the trust. In either case, you may like to leave a non-binding letter of wishes to your trustees, explaining how you would like them to exercise their powers. You can gift assets, including cash, property, or shares, worth up to the £325,000 IHT threshold through a trust without any tax charge. You can gift more than this, but you will pay a 20 per cent charge on the amount above the IHT when you establish the trust and a periodic charge of 6 per cent on all assets above the IHT threshold every 10 years. The trust fund may be subject to IHT when the initial capital is transferred out. This exit charge is based on the rate of IHT paid at the last periodic charge, the time elapsed since the last periodic charge and the amount being distributed from the trust. Solicitors can usually set up a trust; the cost is generally between £1000 and £5000, depending on complexity. www.smith.williamson.co.uk ——————————————- Use business property relief Investments in unquoted companies are exempt from IHT if you hold on to the shares for at least two years, under Business Property Relief (BPR). Companies listed on the Alternative Investment Market (Aim), also qualify for BPR, as do investments in companies that qualify as enterprise investment schemes (EIS). EIS investments allow you to invest up to £1m a year and you can carry forward the previous year’s unused allowance. You get 30 per cent income tax relief but any dividends are not sheltered from tax. Significantly, there is 100 per cent inheritance tax relief after two years, provided the investments are still held at the time of death. FT Money Show Relief at last for annuity buyers as gilt yields inch higher. Are emerging markets worth the extra risk? And how to minimise the impact of inheritance tax. Click here to download the FT Money Show podcast Ms Rosenbloom also says agricultural land which is rented out can become IHT-free after seven years and could be IHT-free after two years if you farm the land. If land and property cease to be used for agricultural purposes, agricultural property relief will no longer be available. If the new activity represents a business in its own right, then business property relief may be available instead, but this relief may not extend to the farmhouse. Where the new activity generates investment income rather than business income – this would include renting a farm cottage or leasing land for solar power, then both agricultural property relief and business property relief could be lost. www.hmrc.gov.uk/inheritancetax ——————————————- Death benefits Lump sums paid from pension plans upon death are normally exempt from IHT. However, it is important that they are not simply paid directly to a surviving partner otherwise the funds will become taxable on the second death. Ms Rosenbloom also makes the point that if you are wounded in military service and this contributes to your death then your estate may become IHT-free. www.hmrc.gov.uk/pensioners/passing-tax.htm ——————————————- Don’t wait until you die The easiest way to reduce your estate for IHT purposes is to make regular gifts during your lifetime. There is an annual “small gifts allowance” of £250, which you can pay to as many people as you like without triggering an IHT charge. A larger annual gift allowance of £3,000 is also available, and you can make one-off tax-free wedding gifts of £5,000 to your children (£2,500 to grandchildren). You can make further regular contributions from excess income. This is defined as any earnings that are not used for living expenses and would not cause a detriment to your standard of living if you gave it away. But you must be able to prove to HM Revenue & Customs that you have “spare” income above your needs. You can give more than the annual limits mentioned above, but you must then survive for at least another seven years for such gifts to be IHT exempt. If you die within this time, your descendants have to pay IHT on a sliding scale: 40 per cent if you die within the first three years, down to 8 per cent if you die after six years. Continue reading
Ontario Farmland Prices Growing
Holland Marsh prices second highest in country Holland Marsh prices second highest in country Rising cost of farmland Rick Vanderlinde The cost of farmland has doubled per acre in some parts of Ontario since 2010. Innisfil Journal BySusan PIgg So you think Toronto’s housing market is crazy? Be thankful you didn’t opt for life on the farm. Agricultural land prices have virtually doubled in some parts of Ontario just since 2010 and, so far this year, have continued to hit new records across much of Canada, according to a new report released Tuesday by ReMax. “All in all, it’s been a couple of very good years on the farm, and you don’t hear that very often,” says Elton Ash, the B.C.-based regional executive vice president of ReMax Western Canada. The main driver has been unusually strong commodity prices. But there are other factors that have pushed farmland prices to silo-high levels in areas like Woodstock, Kitchener-Waterloo and Leamington. And it turns out they aren’t all that much different from the pressures plaguing big-city housing markets like Toronto’s. The demand for prime land has so outstripped supply the last three years that it’s common to have multiple bidders — including Asian, European and other international investors — looking to snap up farms that come on the market. Few plan to sow seeds themselves. They don’t have to. Rents have also climbed dramatically the last few years. Owners can now get $250 to $300 an acre from experienced farmers in areas like Woodstock and Stratford where farmland has jumped in price from about $8,000 to $9,000 an acre in 2010 to $15,000 to $18,000 per acre this year, says Kevin Williams, a ReMax realtor who focuses just on agricultural real estate. “There’s really a land boom going on,” says Neil Currie, general manager of the Ontario Federation of Agriculture. “Investors are looking at farmland as a viable investment and at farming as a viable industry now, which is good news but it does provide a lot of competition for farmers.” British Columbia’s lush Fraser Valley area remains the farmland equivalent of the Four Seasons penthouse suite, with prices ranging from $40,000 to $60,000 per acre. Ontario’s Bradford and Holland Marsh areas take the second and third spots, respectively, at $25,000 and $20,000 per acre and up, says ReMax. But areas like Woodstock, Stratford, London, St. Thomas and Leamington have taken off, right along with commodity prices the last three years, the report shows. With those prices cooling, investor interest in farmland seems to be easing, realtors say. But the supply problem remains. Aging farmers aren’t planning to park their tractors anytime soon, just like baby boomers who are remaining in their homes longer than expected. Kevin Williams focuses just on agricultural real estate and has seen a surge in demand from veteran farm families, just like their big-city counterparts, looking to help their kids get a toehold in the business. It isn’t all about carrying on a treasured family tradition. Most coveted are tracts of land adjacent to the family farm, or close enough down the road that father and son — or daughter — can share costly equipment and benefit from economies of scale. TorStar News Network Innisfil Journal By Susan PIgg Continue reading
Special Report: A matter of life & debt
Special Report: A matter of life & debt Dhanusha Gokulan / 26 September 2013 Financial insecurity is a major concern in the UAE, where 50 per cent residents reportedly do not have a savings plan and many face a barrage of texts, e-mails, and calls from their debtors. Khaleej Times delves into the scenario where a few payment lapses make banks turn into a person’s biggest nightmare and comes up with experts’ advice on how to escape the debt trap. When A Ferns (real name withheld to protect his identity) arrived in Dubai from India seven years ago, he had a frugal family background. “My parents taught me to live within my means,” says the 27-year-old. “There was never any talk of loan, credit cards, or mortgage at home. So when I came to Dubai, I was like a kid in a toy store.” In 2006, his salary was Dh12, 000. In less than two years, he had amassed a debt of Dh175, 000. “There was a car loan, three credit cards, and a personal loan. At the worst possible time my ex-wife filed for divorce, so I had a monthly alimony to send home as well. By the end of 2008, I had lost my job and had a total debt of Dh200,00.” When he began contemplating selling his ancestral land in South India, his father intervened. “My dad paid off a huge chunk of my loan. It was one of the most humbling moments of my life when he had to issue a cheque (handing over) his retirement savings.” However, by mid-2009 he had got another job and swore to pay every penny back to his father and most importantly, to live within his means. “My mistake was that I got carried away and I wanted everything. A big car, a villa in Jumeirah, the latest in gadgets, just everything … “But the worst mistake was that I did not bother with the terms and conditions of my loan repayments. In most cases, I did not even know what the interest amount was.” Ferns is among thousands of UAE residents plagued by the “debt problem”. Almost 50 per cent of UAE residents do not have a savings plan and financial insecurity is one of their biggest concerns, says a survey by research company YouGov. This is not surprising, given the Central Bank and banking institutions reporting a record surge in consumer debt in the UAE this year. Personal borrowing hit more than Dh270 billion in the first five months of this year, and experts say the root cause of the problem is poor financial literacy and easily available credit. Rana Zeeshan Saleem, head of retail asset and KSA retail, Emirates NBD, told Khaleej Times that demand for credit has increased across all categories. “From January to June 2013, there has been a 50 per cent increase in the demand for loans. Car loans have gone up, home loans have gone up, personal loans have gone up. “People take loans for medical reasons, home renovation. There is an increase in demand across the industry in all categories,” says Saleem. Credit card rates range from 34 to 36 per cent and personal loan rates fluctuate from 6 to 8 per cent. “Currently, banks have little or no record of the payment history of an individual; (so) regulating loans becomes a task,” he adds. However, the Central Bank is now planning to introduce a bureau that will keep track of residents’ financial history. Bhairav Trivedi, chief executive officer at Network International, a payment solution provider in the Middle East, says the card market in the UAE has grown 15 per cent in the last six to seven months. “Though there is not much transaction in the real estate market, there is a lot of usage of cards for traditional payments, such as (for) hospitality (hotels and restaurants) and duty free shopping. And now there is an upsurge in the purchase of fuels as well.” How the addiction grows Those who have recovered from debt or are still stuck indicate lack of financial literacy and consumerism are the prime reasons for heavy borrowing. Car loans, personal loans, and credit card dues are the most common loans for which expatriates approach banks. Beating debt UAE Saves Week, organized by www.cashy.me, is a week-long community initiative launched on Sunday to enable people to improve their financial health. The YouGov survey of 1,011 residents to assess attitudes and responsibilities towards money management confirms that financial concerns and debt are the biggest causes of stress among residents. More than a third (34 per cent) said this. Of them, 57 per cent stated they have a long way to go before becoming debt-free. However 55 per cent of this population is ready to make lifestyle changes to get out of their current situation. Perhaps the most worrying find is that more than 60 per cent of the respondents would not be able to survive for six months if cut off from their current source of income. Another 15 per cent said they had no savings whatsoever. According to Nima Abu-Wardeh, founder and CEO of www.cashy.me, financial literacy is what people need. “We launched UAE Saves Week with the objective of helping people take the first steps towards saving money and hopefully, to continue to practise these lessons for the rest of their lives,” she says. “People must learn to live within their means. Financial stress affects every single aspect of our lives. We need to make this a part of public discourse and encourage people to take baby steps.” UAE Saves Week UAE Saves Week brings a series of themed challenges designed to motivate and empower people to manage their finances more responsibly. The themes are Savings Sunday, Pack Your Lunch Monday, Green Tuesday, Wise Up Wednesday, Get out of Debt (GOOD) Thursday, Frugal Friday and Stick With it Saturday. Green Tuesday, for example, aims to improve awareness of the economic benefits of going green. Get out of Debt Thursday teaches people to live within their means and urgently tackle debt, a pressing and growing concern in this region. Stick with it Saturday brings the event to a close by encouraging people to take one simple pledge and sticking with it, even if it is as small as setting aside Dh1,000 every pay day. For details go to www.cashy.me/uaesw/ Experts say taking loans to pay off another loan is no solution. “It might be a temporary fix but you will end up borrowing more,” says Kenyan Evans A Oduya. “My brother was stuck in debt for the entire time he lived in Dubai. He had six credit cards and two personal loans from the bank. He lived way beyond his means for two years, till the credit card debt finally caught up with him. He spent four years repaying loans and eventually left Dubai saying he had no savings.” Augustine C (name withheld to protect his identity), a Filipino national, needs to repay a Dh100, 000 loan he took to purchase a car and now “kind of” regrets. “My monthly salary is Dh11, 000 and my wife’s income is Dh4, 000,” he says. “I spend Dh5,000 every month repaying loans, Dh1,000 goes into my kid’s education and I also pay a Dh28, 000 rent. Electricity, telephone bills, grocery bills, and an occasional outing with the family are the other expenses. It is difficult to save with all of these expenses. “Now I think I should’ve bought a second-hand car instead. I would have been able to save some money.” Several residents, overburdened with debt and unable to cope with the stress, took severe steps like suicide. Jamal (name changed on request), the head of a family of four, has loans of over Dh150, 000. His monthly salary is Dh7,500. “A major chunk of my salary goes in repayment of loans, credit card bills and school fees for the kids,” he admits. “I sent my son back to India because education there is much cheaper. My wife babysits to earn some money. Sometimes, I get very depressed wondering if I will ever get out of this rut. But I need to keep fighting for my family.” Jamal calls credit cards an addiction: “Because they are so convenient, people like me use them on a day-to-day basis to make ends meet.” Rupert Connor, a partner at Abacus Financial Consultants who has been living in the UAE since 2002, says there is very little incentive for people to save here though the government doesn’t provide any kind of pension. “This is a tax-free environment,” Connor says. – dhanusha@khaleejtimes.com Make your money last Financial gurus give Khaleej Times tips on how to slash debt. Rama Chakaki, founder of BarakaBits, a website that focuses on business, the environment and other themes in the Middle East, says people need to be made more aware of the ramifications of debt. They also need to be provided with alternatives. “People now have an insatiable appetite for stuff which tends to tie us down,” she says. “They must learn to enjoy the simpler things in life like health and natural environment.” Rama’s insights on beating debt > Sit down with your family or whoever you are responsible for and draw up a financial plan that matches your income > Save for a rainy day while living comfortably > Prioritise > Rule out impulsive buying > Resist advertised temptations > Watch movies that show you how we are manipulated by the marketing industry > Surround yourself with people from the same culture > Stick around sensible people and educate yourself > Read all the conditions before getting into a financial contract > Do not write post-dated cheques > Communicate with your debtors and draw up a clear plan of action with them > Use the metro and bicycle > Lead a simpler life Rupert Connor, partner at Abacus Financial Consultants Be careful before jumping into any commitment with financial consultants. “A male, single and with no dependants, must save minimum 5 to 20 per cent imum of his income for five to 10 years. “Before you sign up with a consultant, you need to get a referral. I personally would never do business with someone who phones me up and suggests I need a financial advisor. “Do your research before meeting someone and take about six to nine months before signing up for anything,” Connor adds. Connor’s six steps to financial stability > Set goals: For example, you may want to retire at 55 or keep aside funds for your children’s private education > Find out about your finance prospects, investments, family commitments, ambitions and plans > Analyse your current financial situation and squaring it off with your aspiration > Construct a financial plan. And once you decide what you want in the future, draw up a programme to make your goals possible > Implement strategies: You could put a will in place and start saving for your retirement from the age of 25. It will come out to be much cheaper as compared to when you are older > Monitor and review: Conduct a regulatory review, assess your situation and adjust your plan accordingly. Check with your advisor on how your funds are doing and meet with the advisor every six months at least. Continue reading
