How should I protect my assets for my granddaughter?
I have just sold a family business of which I am the main shareholder and I now have a large sum of money to protect for my only granddaughter, who is under 18. What’s the best way to protect the money she’ll have when she’s older?
Camille Wallace, head of the private client group and partner at the law firm Wedlake Bell, says I assume you want advice on investing and asset protection. As a lawyer, I am not strictly qualified to give investment advice, so it is best to liaise with your usual advisers in this regard.
That said, in times of rising inflation, clients are still keen to find safe haven for their capital by investing in assets that will rise in line with inflation. Popular investments include real estate, companies with pricing power, indexed equity or bond funds, short-term bonds (to reinvest as interest rates rise), gold and, perhaps counter-intuitively, deposit savings. While not necessarily generating huge capital growth, cash can at least benefit from rising interest rates.
I have not included raw materials (metals, energy, cereals, etc.). While these can perform well in times of inflation due to rising prices, they are not without risk just like cryptocurrencies.
The easiest way to ensure that the proceeds of your sale are protected for your granddaughter is to make sure your will is up to date and reflects this wish.
I would consider leaving your estate, including investments representing your former interest in the family business, in a discretionary trust held for his benefit with detailed guidelines set out in a letter to the trustees. The latter would confirm how and when she should benefit and what type of investments you would be happy for the trustees to hold.
If you wanted to do tax and estate planning during your lifetime, you might consider starting an investment company with the two of you as shareholders. This would work particularly well if you are investing in stocks, as it provides a tax reduction within the company when receiving dividends. If you initially finance the business with debt, you can benefit from a tax-free return of capital for the duration of the loan. You can maintain control of the business by being the director.
With the supply of rental properties possibly in decline, with some rental owners selling due to rising interest rates on their debt and a tightening mortgage market, real estate could be a good option. Depending on the value of the property, a trust could be used here, either as part of a single or hybrid ownership structure.
Finally, your granddaughter might prefer that her inheritance be invested on a durable mandate, which is not always compatible with preventing inflation but can lead to greater acceptance on her part of the value and the destination. of the heritage it will inherit.
Depending on their age and maturity, you may want to consider their perspective now to ensure that the way you invest the product is in line with their values. It would also ensure that the inheritance is not a surprise and that she is ready to receive it.
Can the tax system help me be greener?
I want to support CO₂ net zero program personally and through my manufacturing company. However, I understand that the subsidies for electric cars have ended and there are no longer any special allowances to invest in energy and water efficient installations and machinery. Are there ways the tax system can help me be environmentally responsible?
Paul Falvey, tax partner at accounting and business advisory firm BDO, says you’re right that those specific grants have ended. However, there are general tax breaks to support investments in green technologies.
The business community overwhelmingly believes that the government should still use the tax system to support its net zero agenda, according to research. Opinions are divided, however, on whether net zero should be achieved by taxing high carbon emissions or by increasing first-year allowances for carbon-reducing technologies.
If you install solar panels or new, more efficient machinery in your business premises, you may be able to claim the 130% super capital cost allowance to offset 24.7% of the after-tax cost. There is no limit to the amount you can invest and claim relief, but this only applies to qualifying investments made before March 31, 2023.
From April 1, 2023, when corporation tax is due to drop to 25%, you can still qualify for a 25% subsidy by claiming relief for investments in plant and machinery under the annual investment allowance (AIA) of 100%.
The AIA is currently limited to £1m investments and is expected to drop to £200,000. However, the AIA and other capital cost allowances are expected to be significantly increased next year to replace the super deduction.
These allowances do not apply to vehicles, but there are specific 100% capital allowances available for the purchase of electric cars or vans to help make your business greener. If you provide electric cars to employees (including yourself), the benefit in kind for them is minimal – only 2% of the value of the car. You can claim relief for the installation of charging facilities at your premises.
At a more fundamental business level, if you conduct technical research to make your processes or products more energy efficient or to use more environmentally friendly materials in your products, you may be able to claim R&D tax relief. If your research involves the resolution of a technological uncertainty, it is likely that a relevant piece of work will qualify for R&D tax relief. This can give an eligible SME tax relief of up to 33 percent of relevant research costs.
The reviews in this column are intended for general informational purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect results arising from reliance on the answers, including any losses, and exclude all liability to the fullest extent.
Our next question
My husband and I own our home in Acton, London and our four year payback mortgage offer has just ended. We have moved to the standard variable rate of 5%. Our house is worth around £950,000 and we owe £150,000 on our mortgage. We’d like to move to a cheaper mortgage, but we also want to move next year and are worried that we won’t be able to move our mortgage and be hit with prepayment penalties. Can you suggest any better deals for us to try and move on, especially ones that wouldn’t prevent us from moving? Is there anything else we need to consider?
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