The benefits – and burdens – of inheriting a family treasure

Precious family heirlooms, whether in the form of art collections, jewellery or property, pose unique challenges in terms of inheritance planning


Paul Fairbairn

Paul Fairbairn


Cripps LLP

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It’s undoubtedly a nice problem to have, and yet a problem nonetheless: how does a family approach succession when its principal asset is indivisible and illiquid, and feels more a family member than a mere object? The asset in question may be a piece of art or jewellery, but most often it’s a beloved property and home.

The conversation

Many assume the decision of the current generation is final and their Will alone should dictate what happens next.

However, this approach fails to involve the next generation in decisions that have huge implications for them and, importantly, rely on their cooperation. A conversation between generations is a practical way to begin.

First on the agenda: does anyone actually want the asset? As the next generation start families and put down roots, the desire or sense of duty regarding the “family gem” may wane. Conversations early on allow planning for both the current and future owners of the property.

If no one wishes to inherit, alternative plans need to be considered. Some action sooner rather than later is likely to be best – particularly in relation to tax.

Assuming there is interest, how to pass it on (and to whom) is the next hurdle. Equality is often sought, but in practical terms equality varies.

A smaller pot of liquid investments can have equal, if not greater, real value to the next generation than an illiquid principal asset, especially if the latter is not income-generating and may instead create a financial burden.

Every situation is different, but it is always better to have understood and managed expectations than to leave people disappointed at a time when differences are exacerbated by grief.

Documenting a decision

Documenting what has been agreed provides an opportunity for all to confirm their understanding.

If you have not involved a lawyer or other trusted professional up to this point, now is the time. They will flag any negative implications (e.g. unintended tax consequences), suggest the appropriate legal framework and provide objectivity.

The paperwork does not need to be complex; at this stage it may only require a flexible will supported by a letter of wishes suggesting an appropriate legal framework for the agreed position.

This may include: straightforward declarations of fractional ownership; the granting of options; overage agreements to ensure future liquidity is shared; or the formation of partnerships or companies to own and run part of the property.

Timing matters

It is the accepted wisdom in business that the young should be brought in early on to learn the ropes and understand future responsibilities, and for senior figures to step back. For an asset such as a property, the same logic applies.

Just because the senior generation cannot formally retire does not mean that they do not want to downsize – or at least downsize their responsibilities.

Inheritance tax (IHT) often motivates lifetime gifts, ideally at least seven years before death. However, this tax advantage must be balanced with other taxes, such as capital gains tax (CGT), which is usually payable on a gift of an asset.

For a family home, if the donor continues to occupy or use the property, the gift will rarely be effective for IHT purposes. In specific circumstances, such as where two (or even three) generations occupy the property together, this rule is relaxed.

Another option is for the senior generation to pay market rent to occupy their home – but while IHT might be saved, there would be affordability, income and CGT implications to be considered.

An opportunity for change

For many, if a family home is to be retained it will mean making it pay. This may be limited to it “washing its face” or providing money for others in the family.

This is often the ideal time to bring in the next generation more formally. From a tax perspective, if you are going to create more value that attaches to or feeds off the main asset, ensuring that value grows in the next generation’s hands is sensible.

It provides an opportunity for the senior generation to relinquish some control and for the young to prove their commitment and secure their future.

For the latter it may not seem to be the ideal point in time, as my personal experience has taught me, but if they leave it too long it may be too late.


Paul Fairbairn

Paul Fairbairn


Cripps LLP

This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 

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