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The effect of borrowings on estate planning
KEY POINTS
- Originally liabilities on property were taken into account and would reduce its value.
- Borrowings could then be invested into inheritance tax exempt assets.
- FA 2013 prevented the use of the tax-saving strategy from 17 July 2013.
- Now borrowings must be repaid after death if they are to be deductible for inheritance tax purposes.
- A liability may be deducted against an estate only if it is discharged out of the estate.
- The changes may affect the use of bank guarantees or letters of credit by Lloyd’s names.
In Shakespeare’s Hamlet Polonius said: “Neither a borrower nor a lender be; for loan oft...
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