Property Assets, Young Adults And Unintended Consequences
27 January 2017
Changes to inheritance tax are potentially creating a generation of “teenage real estate tycoons” according to a recent article in the Financial Times. Tax advisors are reportedly advising non-dom families to remove UK property assets from trust structures and transfer them to the youngest adults in the family in order to defer tax obligations. This is in response to potential changes by the UK government to make offshore trust structures pay inheritance tax on property assets.
There are fears around how young family members will cope: Will they just spend all the rent on fast cars and handbags? Will they manage the properties properly? This is somewhat insulting. Plenty of the most successful entrepreneurs started out in business in their early twenties or younger. Equally, plenty of parents and grandparents have been responsible for wasting the family fortunes. The younger generation arguably have their finger more firmly on the pulse when it comes to trends or diversification. Furthermore, in many instances they are supported by family offices and an array of advisors. In many cases they are on a tight leash: inevitably there is a family principal in the background telling them what to do and how to do it.
One issue they should be considering is the impact these ‘solutions’ can have on the privacy and security of family members. With much quicker access to public records and ownership information (assisted by the new beneficial ownership rules) it won't take long for detractors to work out who owns what. The media love a story about property tycoons. Even more so if they are young and let’s face it, frankly more photogenic than the parents.
The risk therefore is not whether the youngest adult in the family can be trusted with the family jewels but whether they prepared for the spotlight under which they will inevitably find themselves and their activities.
Is the reduction of the family tax burden worth the impact, pressure and ensuing publicity on a younger person? Maybe so. They have to step up and take responsibility sometime. The point is to ensure they are prepared and protected as much as possible for what may be coming.
Before making the changes proposed by a tax advisor, we recommend a candid and impartial look at what is out there on that member of the family and what could be pieced together from social media, other news sources and public records. Seeing it in such stark terms can be the step required to modify their social media behaviour, which will stand them in good stead in a number of ways. This is just as important as for those in their immediate circle. Intelligence gleaned from social media is never limited to just one person’s account. Lastly they should seek advice on that which can be removed because it is superfluous and unnecessary.
If the youngest adults in the family are playing their part then those around them should be prepared to play theirs too. Ultimately, it’s in everyone’s interest because the privacy of other family members are likely to be affected by association.Receive our monthly newsletter