GIA and IHT planning
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Hi, hopefully Nik can help me with this one.
I have a GIA and if I was to pass away I intend to pass this on to my wife. How does this work for CGT purposes?
I don't know if normally funds would be transferred in-species (in this case the fund is with Vanguard LifeStrategy100 and an ETF). Otherwise it would be sold down to cash then transferred. If it is sold down then does that trigger CGT or not (since I would be gone and the fund is now under the inheritance estate)?
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Hi F,
A GIA forms part of your estate. There is no IHT on transfers between spouses. Valuation for future CGT at time of transfer. I would think an in specie transfer as opposed to a sell down and reinvest would be available. If it was sold down, CGT would not apply until your wife subsequently sold at a gain(from value at transfer)
Regards
Adam
Regards
Adam
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Hi, hopefully Nik can help me with this one.
I have a GIA and if I was to pass away I intend to pass this on to my wife. How does this work for CGT purposes?
I don't know if normally funds would be transferred in-species (in this case the fund is with Vanguard LifeStrategy100 and an ETF). Otherwise it would be sold down to cash then transferred. If it is sold down then does that trigger CGT or not (since I would be gone and the fund is now under the inheritance estate)?
Hi Leef44
The CGT on the gain you had within your lifetime passes with you. Your wife then receives the assets at their value at the time she receives them and the gains clock is reset.
In simple terms she is treated as receiving no capital gain on inheritance off the assets and will only face CGT in the future when she disposes of the assets. The acquisition price used at that time will be the value when she in inherited the assets
Hope that helps and that it is a piece of information that you don't need for some time.
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For a SIPP, when that is transferred on inheritance, does that keep the tax wrapper as a SIPP or does it lose that and become GIA?
Yes, the estate can sell the funds down and no CGT is due
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For a SIPP, when that is transferred on inheritance, does that keep the tax wrapper as a SIPP or does it lose that and become GIA?
Current rules allow the funds to be switched into a "beneficiary" SIPP/Pension and still benefit form tax free growth, The beneficiary can then draw the funds at any point tax free. Alternatively the funds can be taken as tax free lump sum. This is on death before age 75. After 75 the same options apply but when drawn the funds will be taxed as income in the hands of the beneficiary or if taken as a lump sum it is again taxed as income.
Following the announcements in the budget and the application of IHT to pension benefits this is likely to change from April 2027 but the details are yet to be finalised
Cheers
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Thank you Nik and Adam for the clarifications on this subject which hopefully will be helpful to others as well.
I have funds in GIA which, between my OH and myself, we may not spend all in our lifetime so would look to leave this to our son in the future. It's a fine balancing act between whether to annually make withdrawals to fund the £20,000 ISA allowance or just withdraw up to the piddly £3000 annual gains allowance (e.g. £15,000 withdrawal if gains are 25% - £12,000 capital + £3000 gain).
This saves the hassle of doing a tax return since my pension is PAYE so HMRC adjusts my allowance for interest income annually.
Who knows, the govt may change this in future but it would seem harsh to pay gains tax followed by IHT.