Gift of shares to grandchild after grandparent's death
Discussion
Just over two years ago, my wife's mother passed away. She had worked for Tesco for about 20 years, and over time had bought a number of Tesco shares - not worth a truly lifechanging sum, but at approx £11k, an amount that justifies putting a little thought into what to do for the best.
She didn't make any specific provision for the shares in the will. Her husband (my wife's father) is still very much around, and since he doesn't particularly need the money they are worth nor particularly wants to own them for himself, he would like to give these to our two children (his only grandchildren).
My working assumption is that as her husband, he would have inherited the ownership of these shares along with the rest of her estate. The estate was well below the threshold for IHT, and probate was granted months ago. He hasn't done anything with the shares yet other than make a note their existence and approx value, so they will all still be in her name.
From what I've read, changing the ownership of shares to anyone other than the spouse would incur a stamp duty charge, and if he were to die within the next 7 years, potentially an IHT liability as well. I guess there may also be a CGT charge as well, though I'm not sure how that would be calculated.
Anyone have any advice on what might be the most efficient method of transferring either the shares, or the value of them, to the two grandchildren? To me, it looks most likely that taking formal ownership for himself, selling them and then transferring the cash value would probably be the easiest route. But it's not something I've had to look at before, so maybe there are other ways. He just wants to get the max value to the kids.
She didn't make any specific provision for the shares in the will. Her husband (my wife's father) is still very much around, and since he doesn't particularly need the money they are worth nor particularly wants to own them for himself, he would like to give these to our two children (his only grandchildren).
My working assumption is that as her husband, he would have inherited the ownership of these shares along with the rest of her estate. The estate was well below the threshold for IHT, and probate was granted months ago. He hasn't done anything with the shares yet other than make a note their existence and approx value, so they will all still be in her name.
From what I've read, changing the ownership of shares to anyone other than the spouse would incur a stamp duty charge, and if he were to die within the next 7 years, potentially an IHT liability as well. I guess there may also be a CGT charge as well, though I'm not sure how that would be calculated.
Anyone have any advice on what might be the most efficient method of transferring either the shares, or the value of them, to the two grandchildren? To me, it looks most likely that taking formal ownership for himself, selling them and then transferring the cash value would probably be the easiest route. But it's not something I've had to look at before, so maybe there are other ways. He just wants to get the max value to the kids.
Usually on the death of a partner shares should be transferred to the surviving partner assuming they have been left the assets of their estate as in your case.
This involves contacting the share registrar and filling out various forms to get the shares put into your FIL ‘s name.
At this stage depending on how the shares are held I don’t believe the cost is much if anything.
When in his name he can then transfer them to his grandchildren as a gift or he could sell them and give them the proceeds instead.
I guess the 7 year rule would apply at this stage.
It might also be worth calling the registrar and asking if the shares could be transferred directly to the grandchildren but I suspect this will be more difficult.
This involves contacting the share registrar and filling out various forms to get the shares put into your FIL ‘s name.
At this stage depending on how the shares are held I don’t believe the cost is much if anything.
When in his name he can then transfer them to his grandchildren as a gift or he could sell them and give them the proceeds instead.
I guess the 7 year rule would apply at this stage.
It might also be worth calling the registrar and asking if the shares could be transferred directly to the grandchildren but I suspect this will be more difficult.
If assets, such as shares, transfer to a new owner as a result of death, probably via a will, then on transfer, as regards CGT the value starts from zero. So, if the new owner subsequently sells the shares the CGT calculation is based on the capital gain only from the date of death after transfer under the will.
If assets eg shares are gifted to anyone (other than wife/husband) before death then that is considered a normal disposal of an asset and CGT will be calculated on the gain from the date of their original acquisition.
So, best way to avid CGT is to let transfers take place on death rather than gift before.
At least, this is my understanding of the situation. I suspect that the new government will have this oddity in its sights.
R.
If assets eg shares are gifted to anyone (other than wife/husband) before death then that is considered a normal disposal of an asset and CGT will be calculated on the gain from the date of their original acquisition.
So, best way to avid CGT is to let transfers take place on death rather than gift before.
At least, this is my understanding of the situation. I suspect that the new government will have this oddity in its sights.
R.
The Leaper said:
If assets, such as shares, transfer to a new owner as a result of death, probably via a will, then on transfer, as regards CGT the value starts from zero. So, if the new owner subsequently sells the shares the CGT calculation is based on the capital gain only from the date of death after transfer under the will.
If assets eg shares are gifted to anyone (other than wife/husband) before death then that is considered a normal disposal of an asset and CGT will be calculated on the gain from the date of their original acquisition.
So, best way to avid CGT is to let transfers take place on death rather than gift before.
At least, this is my understanding of the situation. I suspect that the new government will have this oddity in its sights.
R.
Assuming that’s true, I’d have said the best thing to do is sell the shares asap with no CGT to pay and invest the proceeds in a junior stocks and shares ISA in a global tracker. That way it’s going to be tax free forever (under current rules) and diversified away from the performance of a single company. If assets eg shares are gifted to anyone (other than wife/husband) before death then that is considered a normal disposal of an asset and CGT will be calculated on the gain from the date of their original acquisition.
So, best way to avid CGT is to let transfers take place on death rather than gift before.
At least, this is my understanding of the situation. I suspect that the new government will have this oddity in its sights.
R.
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