Last updated 05:16, Friday, 21 November 2008

The season of giving will soon be upon us; in fact many shops have already filled their shelves with Christmas stock, so even if you are not yet feeling the Christmas spirit you would be hard pushed to avoid it entirely.

Thankyou, Dad: Now is a good time to consider passing on some of your assets to your family in the form of a trust

Many people take this time of year to assess their own needs and those of their families, the making of gifts this year in particular could also make good tax sense.

The current economic climate provides an opportunity for people intending to make gifts to do so with a reduced tax bill.

Both the equity market and the property market have undoubtedly fallen, and for anyone wishing to sell this is not good news, but for anyone wishing to gift assets to their family, it could be.

There are a variety of reasons for making such gifts; the avoidance of Inheritance Tax is the one I most commonly encounter but there are many other reasons.

Making a gift of equities or indeed a gift of property may have considerable Capital Gains Tax implications.

A gift to someone who is connected to you, such as a member of your family, will be taxed as though you have sold the asset at its full market value. This causes a major problem as a tax liability is incurred but no cash has been received to meet that liability.

If the gift is of certain business assets the liability can be deferred, however, the majority of investments or let property will not qualify for this relief.

If a gift of assets is something you may be considering, making the gift in the present economic climate could be advantageous.

If the current market value of the asset has fallen it may be possible to make a gift with little or no tax to pay.

You may, however, be reluctant to pass assets on just yet – you may not want to lose control of these assets and this is often where a trust can provide an ideal solution.

Trusts have been used in tax planning for centuries and offer a solution to many of the problems associated with making gifts. The issue of control is easily dealt with and this approach can also provide protection for the assets given away.

It can be a difficult subject to broach but it is understandable that parents would be reluctant to pass assets to their children if they would then be at risk of claims under bankruptcy or divorce. A correctly-drafted trust deed can alleviate this risk and ensure the assets are safeguarded for future generations.

Of course, it is not all doom and gloom and some of you will have assets that remain in profit; that doesn’t necessarily prevent you from making a gift of those assets.

A trust arrangement can allow the tax that would otherwise be payable to be deferred.

The credit crunch may therefore have reduced our buying power but it has in many ways aided our ability to make gifts.

If you require advice on any of the concerns covered in this article, please call freephone 0800 195 2161 or email moneymatters@armstrongwatson.co.uk