Giving it away isn’t the same as losing control.
This is the bit almost nobody gets told. You can pass the value of a property business to your children and still take the income from it. You can hand over what it is worth and still decide what happens to it. The law has always kept those things apart. Most planning never uses that.
Everyone arrives believing the same wrong thing.
It goes like this. The tax is charged on what you own when you die. So to reduce the tax, you have to own less. So you have to give things away. So you lose the income, and you lose the say, and you are dependent on your children being sensible.
And because that last part sounds intolerable – quite reasonably – most people do nothing at all. They keep everything, and the 40% arrives on schedule.
The false step is the third one. Owning less does not require giving up income, and it does not require giving up control. Those are three separate things, and English law has treated them as separate for a very long time.
In almost every first conversation, the moment that changes the room is when someone realises they were solving the wrong problem. Martin Beadle · Founder
Three things, routinely confused
They travel together in most people’s minds because in a simple case they sit with the same person. They do not have to.
Who the asset belongs to
Whose estate it counts in. What Inheritance Tax is charged on. The thing you are trying to move.
Who decides what happens
Who manages it, who votes, who signs, who chooses when to sell and what to buy. Not the same as owning it, and capable of being held separately.
Who receives the money
Who takes the rents, the profits, the distributions. Again separable - within limits, and the limits matter a great deal.
Five mechanisms, described generally
None of these is a recommendation, and none of them works everywhere. Which – if any – suits a particular family depends entirely on that family’s facts.
Partnership and LLP structures
A partnership can allocate capital and profit differently. A partner may hold a small share of the capital and a large share of the income, or the reverse. Management can sit with named partners regardless of who holds what. It is a genuinely flexible instrument, and it is a real business arrangement – which means it has to be run like one.
Share classes
Company shares can carry different rights. Voting and non-voting. Rights to income but not capital, or capital but not income. Value can be moved to the next generation through one class while control stays with another. Widely used, well understood, and dependent on getting the articles and the valuation right.
Trusts
A trust splits legal title from beneficial interest by design. Trustees hold and decide; beneficiaries receive. The settlor can shape the terms. Trusts carry their own tax treatment – entry, ten-year and exit charges – which has to be modelled rather than assumed.
Debt
If a business buys an asset at market value and leaves the price outstanding, what the seller holds afterwards is a debt, not the asset. Debts can be dealt with in ways an asset cannot. This is ordinary commercial mechanics, but the valuation, the documentation and the commercial reality all have to stand up.
Family Investment Companies
A company holding the family’s investments, with share classes doing the work: freezer shares that lock today’s value with the founders, growth shares that carry everything above it to the next generation. It is the structure most often suggested to families in this position, and it is perfectly legitimate – HMRC looked at them properly and found nothing wrong. It also does nothing at all about the value you already have. A company holding investments gets no Business Relief, so the shares sit in your estate at full value. The honest version, and a screening tool.
There is a trap, and it catches people constantly.
If you give something away but carry on enjoying it as though you still owned it, the rules treat it as though you never gave it away at all. It stays in your estate. The years pass, the family assumes it is dealt with, and it is not.
Signing the house over to the children and continuing to live in it rent-free is the classic. It does not work. There is also a separate income tax charge designed to catch arrangements that get round the first rule.
This is precisely where “keep the income” has to be done carefully rather than cheerfully. There is a real difference between retaining a properly constituted commercial entitlement and simply continuing to help yourself. The first can work. The second is the thing the rules exist to stop.
Anyone who tells you that you can give it all away and carry on exactly as before is either not thinking clearly or not telling you everything.
It means the question changes.
Not “how much do I have to give up?”
But “what do I actually need to keep, and what can move?”
Which is the same question as how much is enough – and it is why we work that out first, in numbers, before anyone proposes anything. Once you know what you genuinely need for the rest of your life, the surplus becomes visible. And the surplus is the only thing worth planning with.
For most families we see, the answer is that considerably more can move than they expected, and they can keep considerably more of what they care about than they feared.
Not everyone. Not always. But often enough that the conversation is nearly always worth having.
Find out which of these applies to you.
Bring what you own and what you want to happen to it. I will tell you honestly which of the above is relevant, which is not, and whether it is worth going further.