Just over half of professional landlords with 10 or more investment properties have no succession plan in place, risking the future sustainability of their business.
That’s the claim from banking firm Handelsbanken. However, the findings are based on a survey of just 120 professional landlords with at least four properties.
Some 27 per cent of those with no succession plan said they had not had the chance to develop one yet, while 23 per cent admitted it had simply not crossed their minds. Around one in five said that they had no one to leave their portfolio to, while 15 per cent stated it is simply not a priority for them – with the same proportion saying the process was just too complicated.
The study shows that landlords with smaller portfolios are far more likely to have taken steps to protect their portfolio from estate tax liabilities: no fewer than 96 per cent of landlords across all age groups with a portfolio of four or five properties say they have long-term succession plans in place, compared to just 52 per cent with more than 10 properties.
Among all those with a clear succession plan, some 54 per cent plan to convert their portfolio into a property development portfolio to attract business property relief, while 43 per cent are considering a charitable trust, which would enable the handover of business to their heirs with minimal tax exposure.
Other popular options include family trusts, family investment companies and acquiring agricultural properties to qualify for agricultural relief.
A spokesperson for Handelsbanken says: “The success of buy to let over the past decade has created huge numbers of wealthy landlords – with a real need for dedicated financial and tax planning.
“Property investors with substantial portfolios often defer creating a wealth succession plan, but are prompted into action when considering the alternative – the need for their heirs to sell assets to meet the tax liability on death.
“A plan that includes the use of a family investment company or a trust may carry some initial tax cost, but if put in place early enough, has the potential to create far greater savings over the longer term."
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So 20 % had no NOK 😢 that is the saddest thing I took from the article, I would be spending my time if I were them trying to enrich my personal life so I would not be alone in old age…..
It's hard to plan when the government keep changing the rules.
My original plan was buy, renovate, rent some, sell some, sell some more, retire.
The government stuffed that up with removing taper relief and charging super extra enhanced CGT.
So then the plan was bring one of my son's in as he wanted to be a landlord, bin the idea of retiring, take out insurance and do a PAYE job so I can amass money in a SIPP to help pay the IHT.
Then the government stuffed that up with Section 24 and the extra 3% SDLT. Being a bit player in someone else's portfolio risks losing a younger person's Child Benefit and causes huge problems and expense when they want to get a mortgage and buy their own home.
I could look at incorporating fully but what's to stop the government changing the rules again?
I could look at Trusts and all sorts of complicated things but again what's to stop the government changing the rules?
It seems to be far harder and more expensive to undo things than to arrange them in the first place.
Absolutely on the money Jo. Like you I had plans, but the Government keep moving the goal posts has made this virtually impossible to plan a strategy.
This article is ill thought out and needed to look at the reasons that Landlord's had not made plans. That said there are individuals that make it up as they go along and this often works for them, though not for me.
Jo - Whatever is done, the government will not be far behind ready to cash in 🤔
Jo
It's people like us who are targeted because we generate wealth.
I did the succession planning right up front, with most of "my" properties originally bought in my grown up children's names to avoid IHT and put CGT under their control.
It also helped keep the tax on profit at 20% until their own earnings took them into higher tax bands.
I've charged them management fees to look after them, levied at rates to minimise the total tax paid by us as a family.
They're already planning to repeat this process when their own children reach 18.
There is no need to spend anything on fancy lawyers to make this happen but family members need to trust each other and work together.
It’s hard when you’ve got an establishment trying hard to destroy you in every way
Robert, we’ll done that is excellent but our problem is trust and the people they get involved with, when the law is completely in their favour and you standing on one leg.
That's very true Michael, chatting to an older landlord a couple of yrs ago (sadly no longer with us) he said he was not signing anything over, as much as he got on well with his children and their partners he wasn't running the risk of one of their marriages hitting the rocks and an inlaw running off with the wealth he had worked hard for, for what it's worth I agree with him
Andrew
Property belonging solely to my children before they married remains their own property and would not be claimable in any divorce settlement.
No tax Planning allowed from where I am standing. Heavens knows I have tried for years I have had the experts Tax Consultants, Accountants, Valuation Surveyors, Solicitors, lots of advice but nothing I could stomach, they were amazed couldn’t understand why I wouldn’t jump at it. I had to walk away £10k lighter what ever happens happens.
I seen what happens to my friends Est’ RIP @70 with ‘C’, let the professionals deal with it by lasting Power of Attorney, 4 years later still not sorted and some property sold under value, brother & sisters were the beneficiaries still waiting. Ah yes professionals.
Professional rip off merchants .
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