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Estate and Asset Protection Structures and Strategies

  1. If you already own a property abroad you will probably have found out by now that it is worth more than €16,000! Yes €16,000, there isn’t a nought missing!

    That means you have an inheritance tax problem in Spain since €16,000 is around the figure that your property becomes taxable. You might have also found out that unlike in the UK there is no tax free transfer of property share to a surviving spouse after first death in Spain; so there’s an inheritance tax liability facing the survivor in certain circumstances at first death on top of everything else at such a trying time.

    In addition you’ll probably also be aware that if you sell your property and it has increased in value since you bought it then you’ll be facing a Capital Gains Tax bill too…..even if you are downsizing you’ll be taxed on that part of your profit you don’t use to buy your new property.

    ….oh, and I forgot, if you are renting the property out then there’ll probably be in income tax bill to pay as well….

    …. and as a UK Tax domicile (oh yes you are) you may even be liable to assessment for taxation in the UK on your assets outside the UK unless you have taken the necessary measures to avoid this further pitfall.

    Our Continental Asset Protection Strategy will remove these liabilities and leave your property for your enjoyment without the worry of taxation.
  2. If you are about to buy a property then the last thing you should do is buy it for cash without first taking proper advice as to the best way to do this - there’s absolutely no point in volunteering your wealth to the local tax authorities when there’s no need to.

    The new UK pension legislation will help a lot of people in this respect (see following sheets) but will not suit everyone’s needs and certainly won’t tax protect you in any country other than the UK.

    Our Continental Asset Protection Strategy will plug that gap for you and ensure that your overseas property investment(s) are accomplished in a tax efficient manner.

  3. If you are investing in multiple properties in Spain and other countries and/or have business assets in the UK or elsewhere still, then you really do need to talk to us about tax protecting all your assets wherever they are located as well as protecting your income stream(s) against unnecessary taxation - again, there is no point in exposing yourself to unnecessary taxation when there are perfectly legal ways in which to protect yourself.

    Our solutions are somewhat more sophisticated than your local accountant, solicitor or financial adviser may suggest and have been in use now for more than 10 years without challenge or compromise.

    Clients entrust a total of over 1 Billion of asset value to the solutions we promote every year and there’s no reason why you shouldn’t be amongst them.

UK Pensions, SIPPs and Property Purchase after A-Day, 6th April, 2006

Pensions are among the most tax-efficient and effective ways to save for retirement and will indeed remain so after 6th. April 2006. After that date, so-called “A-Day”, life gets easier for retirement savers as the government brings in a new simplified set of rules, effectively shelving the eight previous tax frameworks for pensions.

  • extra retirement funding choices, including residential property, precious metals and even fine art
  • you and your employer will be able to pay in up to 100 per cent of your earnings for the tax year - the annual allowance
  • this allowance is capped at 215,000, with the limit set at 3,600 for low or non - earners paying into personal and stakeholder pensions.
  • all pension investors can take 25 per cent tax-free as cash of the benefits of their built up pension investment, regardless of the kind of scheme it is although dependant upon trustees changing existing pension scheme rules in some cases.
  • a new limit on the value of assets built up within your pension initially set at 1.5million as a lifetime limit
  • This is also the maximum amount that can be paid out as a tax free lump sum to your beneficiaries in the event of your death
  • any value above the lifetime limit above will be subject to a new tax charge known as the lifetime allowance charge, or recovery tax, of up to 55 per cent.

As we have seen above the new rules will allow individuals to hold residential properties, such as holiday homes, buy-to-let properties, and even in some limited circumstances private homes within their pension while attracting significant income tax relief.

  • Property at home or abroad could be purchased outright by the pension, so higher-rate taxpayers, for example, could buy a 100,000 buy-to-let property at a net cost of just 60,000 after tax relief if the property is held within their pension.
  • if there isn’t enough money in the pension to buy a property, then the pension can take out a mortgage up to a maximum of up to 50 per cent of the pension scheme assets
  • As there is no such thing as a free lunch, there will be additional tax charges where a pension scheme member or someone related or connected to them, enjoys the benefits of an investment such as a holiday or residential home and do not pay commercial rents for that use.
  • income and capital gains from the property are to be tax-free
  •  the usual costs of buying property must be deducted from income, including stamp duty, legal fees, surveys, and the costs of employing lettings agents to find tenants and managing the property on your pension’s behalf.

Most peoples’ pensions are grossly under-funded, so there will only be a small proportion of pension plan investors who will be able to take advantage of this mechanism - and even then they will be committing all their pension investment to property - one investment category - which flies in the face of best investment advice which is to diversify in order to spread risk.

Many people though may decide to re-mortgage, perhaps denominated in a currency with a more attractive interest rate, to release equity from an existing property (thereby increasing their existing mortgage) and use this cash to top up their pension (by the amount of their annual income) for one or more years and to also provide the purchase deposit.

It is also important to recognise that investing in overseas property, while appearing relatively straightforward and appealingly tax efficient, will involve taking specialist legal, tax and financial advice both at home and abroad because your UK pension will not remove your liability to taxation in the country in which the property or properties is/are located.

Wealth Protection International Limited routinely assists clients in this respect already.

Many new overseas property developments are often set up on two or three year build timetables so depending on the their annual income an individual may be able to amass sufficient in their pension using equity released as above to effect such a purchase outright, or use a combination of this and a mortgage to do so.

There then remains the question as to how best to convert one’s pension investment to an income in the future - the rules for doing so will also change after April 6th, 2006.

  • individuals will still be compelled to take benefits from their pensions by age 75
  • A-Day will allow the introduction of new types of annuity:
  • ‘limited period annuities’ permit you to buy annuities in smaller chunks, each spanning a five year term, while the rest of your fund can be left invested.
  • ‘value-protected annuities’ respond to one of the key criticisms of annuities: if you die shortly after buying an annuity, your family loses your life’s savings because the money is absorbed by the collective fund of an insurance company’s annuity policyholders. The ‘value-protected annuity’ re-distributes your pension asset among
    those who live longer BUT after a tax charge of 35 per cent has been deducted.
  • Unsecured pensions’ will be similar to income drawdown under current rules; they can be used up to age 75 and a maximum amount of up to 120 per cent of the annual income payable from an equivalent single life, level annuity can be taken.
  • then, if not already taken, at age 75 EITHER an annuity must be purchased OR an ‘alternatively secured pension’ (ASP) must be taken. Although less attractive to those who need to rely on their pensions for income, for some, ASPs can work as a ‘family’ pension plan. The spouse, children and the investor can all be members with the facility to pass pension assets to their children's pension, for example. Under ASPs, the spouse or dependants can either buy an annuity or continue to draw an income from the fund after the member’s death. If there is no spouse or no dependants, the pension assets can be paid to another member or a charity.
    Using an ASP arrangement looks particularly enticing if you have invested in a residential property within your pension, but it must be highlighted that the Inland Revenue will prevent ASPs becoming a way of avoiding inheritance tax, so caution and professional advice are recommended.

Wealth Protection International Limited, through our Collaborators, is able to help pension investors with the interpretation and application of the new regulations to their present pension investment arrangements in readiness for “A” Day and thereafter.

When all said and done, so long as the investor is aware of the potential pitfalls, particularly all the new penalty taxes and funding ceilings, the use of your pension for purchasing property for pension investment may well be a valid and potentially rewarding enterprise.

There is however an alternative to consider if your existing pension investment portfolio value is currently around 350,000 or more.

By using a Pension Trust specifically APPROVED by the Inland Revenue, your pension wealth can be moved, under statutory protection, into a fully protected environment. Then:

  •  Pension wealth can be accessed in accordance with need
  • Complete freedom of trustee investment, including: loans to members; loans to companies; purchase of residential property
  • No compulsory annuity purchase
  • No shadow annuity (‘unsecured pension’)
  • Fully tax exempt investment status, and tax free after A-Day
  • Fund grows tax free
  • No need to join A-Day system and no A-Day charges
  • No need for a Pensioneer Trustee
  • Fund available tax free to post-death beneficiaries
  • No 55% Recovery Tax
  • No 35% fund tax prior to inheritance on unused funds at death

These benefits are provided through the implementation of a highly technical Product by our Solicitors’ renowned Wealth Strategy Department. Comprehensive written legal advice, together with specialist consultation and client support - both during and after the transactions - are included in the fixed fee for your Private Pension Trust:

  • Uses Statutory Reliefs
  • Obtains specific Inland Revenue approval
  • No Tax Avoidance
  • Implemented with your existing professional advisers
  • Full disclosure to the Inland Revenue
  • Implemented for you by a leading firm of London based tax lawyers
  • Pound for Pound indemnity as an additional safeguard for your investments
  • Independent professional trustees appointed
  • A similar strategy will be available post A-Day.

Wealth Protection International Limited and our collaborators would be pleased to discuss the best route for you to take in the future in respect of your existing pension assets and will ensure that coming up to and after “A” Day your savings for your retirement are handled and directed appropriately to your best advantage.

Please contact us through our website www.wealthprotect.co.uk
or by telephone or email to info@wealthprotect.co.uk ,
we look forward to hearing from you.

Rex Ashcroft FPC, Cert.PFS, MIoD
Wealth Protection International

Tel: 0800 7317479 or +44 (0)1263 821906 Mob: +44 (0)7834 393899
Registered in England as Company No: 5207159
CCL No: 559924 - DPA Reg. No: Z8725223
The content of this document and any attachments does not constitute, or purport to provide, financial advice in any respect.
Such advice recommends a course of action based upon the specifics of an individual’s personal circumstances, we can arrange for such advice to be provided where appropriate. This content is therefore only intended to provide general information.

Posted 02Nov05