How To Protect Your Wealth & Reduce Tax With The Asset Protection Guy

Most property investors spend years building wealth. But very few spend any time thinking about how they're actually going to protect it.

What happens to your portfolio if you die unexpectedly? Who makes decisions if you lose mental capacity? Will your family inherit what you've built, or could poor planning, unnecessary tax, or even remarriage mean your wealth ends up somewhere you never intended?

In this episode, I sit down with asset protection specialist Mike Hiner, better known as The Asset Protection Guy, to unpack the estate planning mistakes many property investors make. 

🎯 What You'll Learn

• Why a basic will often isn't enough to protect your family and assets
• What really happens if you die without a will
• The difference between joint tenants and tenants in common
• How trusts can help protect wealth across multiple generations
• Why inheritance tax can become a major problem for property investors
• The role of holding companies and family investment companies
• Why lasting powers of attorney are just as important as wills
• How business owners can prepare for unexpected illness, incapacity or death

If you've spent years building a property portfolio, this episode will help you understand the risks that many investors overlook and the practical steps you can take to protect your wealth, your business, and the people you want to benefit from it.

Learn more about Strategic Asset Protection here: https://www.sap-legal.co.uk/

💻 Resources & Mentions

• Join my Accelerator Programme: If you’d like my direct input on your current or next project, you can watch this video or book a complimentary strategy call with me here.
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• Social: Follow me on Instagram for daily HMO tips, advice, and behind-the-scenes updates here.

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Transcript

Andy Graham (00:02.67)

Hey, I'm Andy, and you're listening to the HMO podcast. Over ten years ago, I set myself the challenge of building my own property portfolio. And what began as a short-term investment plan soon became a long-term commitment to change the way young people live together. I've now built several successful businesses, I've raised millions of pounds of investment and have managed thousands of tenants. Join me and some very special guests to discover the tips, tricks, and hacks, the ups the downs, the best practice and everything else you need to know to start, scale and systemize your very own HMO portfolio now.

Andy Graham (00:40.718)

Today's episode is one that I think every property investor needs to hear, because we're talking about something that, if I'm honest, most of us tend to put off until it's too late. As property investors, we spend years building our portfolios. We focus on finding deals and adding value, refinancing, growing cash flow and creating wealth. That's what we're good at. That's what we enjoy doing. But very few property investors spend the same amount of time or even any time thinking about how they're actually going to protect what they've built, their wealth.

What would happen if you were to die unexpectedly, or lose your mental or physical capacity? How exposed are you to inheritance tax? What happens if you divorce, if your spouse remarried, if your children or business partners were for whatever reason to take over your business? What could your capital gains tax bill look like one day? These aren't the most exciting conversations to have. And in fact, some of them are pretty darn scary. But getting this wrong could undo years or even decades of your hard work.

It could mean that everything that you've built ends up in the hands of somebody else one day. Now, to help us navigate all of this very complicated stuff, and it is complicated. Today I'm joined by Mike Hiner. Mike is the asset protection guy, and he really is the expert on all of this stuff. Today we're going to cover wills and trusts and property ownership and lasting powers of attorney and company structures and succession planning and a whole lot more. And Mike is going to explain to us why these aren't just legal documents.

While they aren't just things for the super wealthy and other people, and why these are essential parts of running a successful property business. Now, I'm happy to admit that before I sat down and recorded this episode with Mike, I didn't know a whole lot about all of this stuff. But as it turned out, I'd even overestimated that. Now, I suspect a lot of our listeners will probably be in a similar position to me. Very busy investing, very busy doing other things, and not really paying this sort of stuff, the attention that it really deserves. 

Well, let me tell you now that today's episode is going to completely blow your mind. You are gonna think very, very differently about your wealth planning after today's episode. And that is exactly the point. Let's get into it.

Andy Graham (02:51.406)

Hey guys, it's Andy here. We're gonna be getting back to the podcast in just a moment. But before we do, I want to tell you very quickly about the HMO roadmap. Now, if you're serious about replacing your income or perhaps you've already got a HMO portfolio that you want to scale up, then the HMO Roadmap really is your one-stop shop. Inside the roadmap you'll find a full 60 lesson course delivered by me teaching you how to find more deals, how to fund more deals and raise private finance, how to refurbish great properties.

How to fill them with great tenants that stay for longer and how to manage your properties and tenants for the future. We've also got guest workshops added every single month. We've got new videos added every single week about all sorts of topics. We've got downloadable resources, cheat sheets and swipe files to help you. We've got case studies from guests and community members who are doing incredible projects that you can learn from. And we've also built an application just for you, that allows you to appraise and evaluate your deals, stack them side by side, and track the key metrics that are most important to you. To find out more, head to theHMOroadmap.co.uk now and come and join our incredible community of HMO property investors.

Andy Graham (04:01.806)

Mike, thank you for joining me on the show today.

Mike Hiner (04:03.95)

Thanks very much for inviting me, Andy. Appreciate it.

Andy Graham (04:06.03)

So Mike, I'm start with a biggie, and I think I might know the answer to this question, and I might be an example of the answer as well. But Mike, how exposed do you think the average property investor is to things like inheritance tax, divorce, losing mental capacity, or an unexpected death and the issues that these sorts of things can create?

Mike Hiner (04:29.43)

I think to be honest, it's not just property investors. I think the general population in general are massively exposed to all of these things. Most people tend to sleepwalk into inheritance tax issues and such like a lot of people are just out there creating what they're creating, whether that be property portfolios or businesses or whatever it is. They're out there building what it is they're looking to build, but they don't then give any thought to actually how they're structuring that to IHT problems in the later on. Most people also here in the UK don't even have a will. 

So 70% of the UK population have no planning whatsoever. So they've not even taken that into consideration about what's going to actually happen to all this wealth at the point that they actually end up passing away. Also, mental capacity is also another massive one. People don't really think about potentially losing capacity and how that's going to affect the business. So it's kind of wide open for most people. Most people think that their planning is around just having a will.

Don't get me wrong, having a will is always better than not having a will, but it's just not going to do what you're ultimately expecting it to do. A will basically just says, look, I've created all this wealth. When I die, I'm ultimately just gonna pass this wealth to you as the named beneficiary. But there's so many implications with regards to that, regards to things like generational inheritance tax and divorces and creditor claims and bankruptcies and care fees is another massive one here in the UK. And care fees is a massive one when it comes to property ownership. Forty owners are sold every single year to paper. pay for care. So yeah, it's a massive issue. It's a massive issue.

Andy Graham (05:52.44)

Well, rather embarrassingly, I have to admit this, Mike, that I think that I'm definitely in the naughty corner. And actually, I feel quite embarrassed because I've got a few questions today that I would love to talk to you about to find out a little bit more. Things like wills and trusts, powers of attorney, company ownership and structures for property holding vehicles and businesses and things like that. But I have to admit that I've been in business a long time, nearly twenty years now. I've got a lot of property. I haven't got any wills or trusts or really giving them any thought, but possibly even worse, I haven't even given a will or thought, and I don't have a will. 

I have a daughter now as well, which I think is what has prompted me to actually do something about all this. I had a conversation with Gem, my wife, recently, and actually I thought, I have really no idea how any of this works, if anything was to happen. So that's me holding my hands up. But I'm hoping that you can enlighten me here today and all of our listeners. So can we start with wills and trusts. I suppose if I gave you a scenario, if I were to die tomorrow, touch wood of course that that doesn't happen, but if I were, I've got my portfolio of properties owned in different companies and some of my personal name. I am married. I've got a child now with Gem. What happens next? What actually happens?

Mike Hiner (07:10.072)

Well, the first thing is that to identify here is the fact that you've not got a will. That's kind of a massive issue, really, because when you when you haven't got a will, you die what they call intestate, which means you get the government will, which is a set of rules set out by the government as to who actually benefits from the estate that you've actually created. 

Now you're married. So what that means is with the intestacy rules, your wife will receive the first three hundred and twenty two thousand pounds worth of your estate. That is it. She'll receive the first three twenty-two and she will receive half of any residue.

The other half will go or be held. I'm kissing how old is your daughter now? She’s eighteen months. The other half will be held on trust for her for when she becomes eighteen, and then she'll receive that other half at the point that she becomes eighteen. But your wife ultimately will receive three twenty two and half of any residue because of that's the intensity rule. So really, I mean, from a will point of view, even if you just wrote a just a simple basic will that just left everything to your wife.

Mike Hiner (08:06.914)

But the other reason you want to name you or you want to have a will in place at this point is to name guardians. That is massively important for you. Because dare I say it, if you and your wife went out one evening, you had a babysitter looking after your daughter and you both didn't come home, well now we've got a real issue because you've not got a legal document that's written down who you want to look after, who's going to look after that, your daughter.

So that's a real, real issue. So now we've got social services getting involved, potentially taking your daughter into care, potentially. Although you may well have two loving families that will look after your daughter. Well, there's not a piece of paper saying, well, who that's gonna be. So state will decide ultimately. So they'll take your daughter away potentially, interview the families and they who they think is potentially best. And then six months, twelve months, two years later, they'll reintroduce her back into the family as to the people that they believe would be best suited.

And that's in itself, if you've got minor children, regardless of inheritance tax and all the other bits of it, if you've got minor children, you should always, always have a will, just purely to name guardians. The assets at that point are irrelevant. It's about making sure that your loved ones are taken care of. It's as simple as that.

Andy Graham (09:19.406)

I felt a bit embarrassed that I hadn't had any of this in place sitting down and talking to you.

Mike Hiner (09:24.354)

Like I said before, 70% of the UK population haven't got a will. And most of them they don't realize the implications. And that's a real issue that people don't realize. People think a will is something that you do much, much older in life, but it's not. It's a document that ultimately should follow you through your life. When you're 18, you should have a will. You guess you might have a car and a bank account and bits and pieces and a little job sort of thing, but you should have a will because you've still got some small little assets at that point. But your will ultimately evolves as you go through life. So as you add children, you add guardians, as you add wealth, you start adding potential trust and such like.

Andy Graham (09:54.86)

Well, I guess I never even thought of this topic of wills and trusts and I never even thought of it in that sense. I think I was thinking purely just from a financial perspective and maybe just a practical perspective. But now I feel more ashamed than I do and embarrassed. And really, I can't quite believe I didn't know that I really should know this stuff and should have done something about this so and sooner, and obviously need to really start thinking about this as a very high priority. So is the sort of will that you're talking about a standard mirror will?

Mike Hiner (10:29.784)

Yeah. That's all you need to start off with. If you're no real assets and bits and pieces, most people will have a standard basic will, which is literally I've got these assets. When I die, I'm going to give them to my wife as the first line beneficiary and then down to my children as the second line beneficiary, and vice versa, obviously. And that's really all a standard will is. It's just taking care of the people immediately. So it's my wife first, my children second. But there's issues with regard to that as well, with regard to dare I say wealth transfer, divorces later on.

Your wife then remarrying after you've given her all the wealth, all going down another line. There's I mean my story, and part of the reason why I got involved in doing estate planning, because my original background was financials. So my story really is that my mother was disinherited. That's how I came to be doing what it is that I do with with all the videos that we do on social media about the education side of things, was because of that story with my mum. So in real kind of brief history of it. My granddad passed away fairly early on in life. He was the same age as me when he passed away. He was 53 years old when he passed away. And they had a simple basic will. And it left all the house and some cash assets and bits and pieces all to my nana. It all went to my nana, which was great back in the day. The issue then, though, was that my nana met Bill. She remarried at that point. And when she remarried, she took with her the cash that she had from the sale of her house and such like. She put that money into Bill's mortgage, paid it down. They lived there for 20 odd years or whatever it was they lived there for. But the issue for my mum was is that my nana died first. And when she died, again, another basic will was set up and all the assets and all that wealth passed by

Andy Graham (12:00.856)

So it left that side of the blood line.

Mike Hiner (12:04.398)

But the issue was, then see, is that obviously Bill was in control of all the assets at that point. But the also the other issue for my poor old mum was that Bill had his own daughter. So what Bill did at that point was he rewrote his will and he left everything to his daughter, which then left my mum completely disinherited. But it also meant that my nana and my granddad work their entire lives and none of their own family benefited from everything they ever did. Nothing.

And that’s also the issue we have with a basic simple will, because a will will just say, Look, I've got the assets today. When I die, I'm giving them to you. That's a real issue in the world that we live in these days, because I'm second married. So if I just had a simple, basic will again and I left everything to my wife now, well then history could be repeating itself for us because I've got my two children from my first marriage and my wife's got her two children from her first marriage. So I have a transstructure within my will to protect what I've got for the benefit of my children later on.

Andy Graham (13:02.358)

So actually, this is quite a complicated subject in a sense that there are there's far more than perhaps just your perhaps a wife or a husband that you might leave and a child. It's actually all of the things that can happen in life in the future that could then actually mean that anything that was passed down could still go astray. And you may have been under the assumption that it was all okay because it was going to your wife. And so Mike, another question that I have for you then on this subject.

In the example that we sort of talked about, if I were to pass away with a simple will, part of it would go to my wife and part of it, you know, would get put into trust. How much of my wealth does that have? Is that everything? And beyond that point, are we then starting to think about the implications of inheriting that wealth? If I have a substantial portfolio of properties that are worth a certain value and businesses and cash, is this a separate piece of work that really has to be kind of planned alongside your will and things like that.

Mike Hiner (14:03.894)

Yeah, I mean, when you're talking about the fact that you've got multiple properties, you really need to have a hey, yes, you need to have a will. A will is a kind of a it's a given. You have to have it. You either do it yourself or you're gonna get the government. Well, you will have a will at some point, but it's really about who's benefiting when they're benefiting. Now, the important thing to really remember because you're married, it doesn't matter the size of your estate on first death. There is never any inheritance tax to pay on first death because you're married. Inheritance tax is paid on the second death of as a married couple.

Andy Graham (14:31.214)

Can I just clarify that? So if I were to die, there'd be no inheritance tax due, but when Gemma, my wife, were to die, then that inheritance tax would be crystallized.

Mike Hiner (14:44.64)

It would, but you need to structure your wealth to make sure that it's going in the right way. The will is all about direction. It's about well, where are these assets going and how are these assets going? That's really, really important. If you've got multiple properties and you're just leaving those properties as it were, I mean, in take my story, for instance, with regard to my mum being disinherited. If my granddad had a portfolio of properties that he left to my nana, those properties ultimately would have gone out of the family and completely disinherited. It would have been absolute nightmare.

There needs to be a structure. If you've got certain wealth and certain assets, there needs to be a structure. But also you need to look at the way that you own those properties as well. That's massively important as well. Because we don't want you owning property jointly, for instance, with your wife. You want you might want to think about incorporation and such like and putting it into a limited company. That's a another option that you've potentially got. So there's lots of different things, but it's really about getting the advice about your own particular circumstance. It's not just an off the peg. And that's the thing, estate planning is not off the peg. It's about understanding who you are, what you've got, what your family dynamic is and everything else to come up with a bespoke plan for for you as an individual, for sure. Okay.

Andy Graham (15:53.678)

You mentioned trusts. What are trusts and what do they actually do? And I know that this can be quite a complicated subject having briefly, briefly looked at it, but can you just summarise for us, Mike, what trusts really are and what I do?

Mike Hiner (16:09.07)

Well a trust really is just a piece of paper. This is a trust. It's just a piece of paper, ultimately. But it's its own legal entity and that's important.

Andy Graham (16:17.302)

Like a business is a legal entity, a trust is a legal entity.

Mike Hiner (16:20.414)

It's its own legal entity. So when I pass through my structure, my will structure, my will ultimately directs my assets to my trusts that are written within my will. And the reason I'm doing that is because I want to make sure that when I pass, I'm not passing my wealth onto anyone specific. Because if I give it directly into my children's estates, for instance, all I'm doing is I'm increasing the size of my children's estates. So there's one thing we have in the UK, which is called generational inheritance tax.

Nobody really knows about it, but nothing will eat your wealth quicker than generational inheritance tax. Nothing. It's proven. And generational inheritance tax is all about I pass away, I've got a substantial estate, I pay inheritance tax when I die. So the death planning in the will and the structure, the trust structure within the will does not mitigate my inheritance tax. That's important to understand. But when I pass, I have those assets go into trust. Those assets are then owned by my trust.

Now, like I was saying, if I just gave that wealth to my children, I've increased the size of my children's estates. So when they then pass away, I've already paid inheritance tax on those assets. I then gave those assets to my children. I've increased the size of their estates. When they then die, they pay inheritance tax now for a second time on the assets I've already paid inheritance tax on. Well, that's absolutely bonkers. So I can actually have my assets when I die, pay the inheritance tax, pay it once. That's important. We pay the inheritance tax once.

And then the assets go into trusts. Now, because the assets are owned by the trusts, and what I've done within my trust is I've named my beneficiaries and my trustees. So the trustees manage the assets within the trust, and the beneficiaries can then benefit from those assets in the trust. They can be the same people. So in mine, obviously, I've got my children as the trustees and the beneficiaries. So they can manage the trust and do what they need to do. But the difference is when they come to take their inheritance.

They're going to get a loan note that says, actually, those assets don't belong to you. We're going to loan these assets out of the trust for you to do whatever with them. I don't care what you do with those assets. Give them away, spend it, do whatever you want to do. Don't care. But the loan note creates a debt to their estate. And that's important because now not only have they had the benefit of my estate over their lifetime, when they now pass away, because there's a debt that's owed back to my trust, it

Mike Hiner (18:44.844)

reduces the size of their estate for inheritance tax because I want the value, not the assets. I'm not interested in the assets. I just want the at the value of what they borrowed from the trust to come back to the trust. And the reason I want it to come back to the trust is because I now want my grandchildren to come forward, take that same value and go do the same thing over their lifetime. So now what I'm doing is I'm creating legacy, which is my driver in life. I'm creating legacy for my children first. Then my grandchildren

Then their children, so on and so on and so on. And I can do that if I have trust structure in the will. If I just give those assets to my children, well, it all depends on what happens with them. If I gave all that wealth to my son and he then went and got married and got divorced, well, I know I'm gonna lose a minimum of 50, 60, 70%, drifting off down the road to feather and nest of people that I've never ever met. That's not what I'm working my socks off here for. Because you've got to remember, when I die, it will be my life's work. My children are ultimately inheriting. I don't want to be off down the road to feather a nest of people I've never met. That is not happening in my world.

Andy Graham (19:49.07)

Can anybody set up a trust, Mike? And does it make sense to do it irrespective of your sort of accumulated wealth, whatever that figure is? Or is there a point at which it only really starts to make sense?

Mike Hiner (20:01.902)

Well, again, it's all relative. So for the man in the street who's got a hundred thousand pounds, it's still a hundred thousand pounds. For the man on the street who's got ten million, it's ten million. But it's relative as to when you need that trust. But the trust element within the will is really about because the trust itself doesn't become activated until you ultimately pass away. So it's just a structure that we're creating within the will at this point. So it's really about, like we said, the life stages. So at the moment, my twenty two year old daughter, as it were.

She hasn't got many assets, but she's got a will because she has got some assets, but it's only a basic will that she needs at this point. But as she progresses through life and has children and creates some wealth and bits and pieces, she'll maybe to change that structure and add her trust structure to that will to ensure that what ultimately passes, passes to her children and nobody else. That's important.

Andy Graham (20:51.436)

Okay. And when you've set up a trust, let's say that that the assets in that trust are one of my portfolios of properties. And do they just live in the trust in the same way that they currently live in an SPV in a limited company? Are there any limitations as to what you can do? Can you buy more? Can you sell? Can you get lending? Practically speaking, is it any different?

Mike Hiner (21:16.238)

But the lending is an issue because obviously the property's not owned by an individual, it's owned by a legal entity. So that's an issue if you want to actually get any funding on it, as it were. But again, there's things that can be done to take properties out of trust, put properties back into trust, as it were. But again, like I said before, the other thing to think about is if you've got a sizeable portfolio is to think about incorporation and getting those properties into a limited company. You never really want to be owning those properties in your sole name these days because it doesn't really work with regard to the capital gains and the selling of them and the IHT liabilities and all the other bits and pieces. If you can get those properties into a corporate structure, there's so much more that you can actually do. So much more from an IHT perspective.

Andy Graham (21:55.278)

Well, property ownership was absolutely on my list to discuss. And I think we are venturing now into there fairly organically. And again, I'll admit that I hold some properties in my personal name. That's how I got started. And that's a problem for me already. And that's gonna be I suppose compounded at some point in the future when I'm likely to inherit some more properties which are owned in the personal name of my parents. It'll be pretty terrible when they come to me from an income perspective. 

So these sorts of things are definitely on my list of need to be addressed. But I guess a lot of landlords, they own a property with a spouse or a partner. Again one of the questions I've got, and this comes up almost every time I buy something, depending on the structure, but what's the difference then of owning property as joint tenants and tenants in common? Because this sounds like a one of the almost the most fundamental sort of components of ownership structure and tax planning possibly.

Mike Hiner (22:50.442)

It is. I mean, most people in the UK, if they own a property with somebody else, it would always be owned jointly. Always. Now the issue with jointly owned is that, especially if it's just your main residence, is that when the first person passes, it doesn't matter what I've put in my will. It makes no difference at all. The property, because it's jointly owned, means we both own it a hundred percent. So if I died, the property would automatically pass to my wife. Automatically. Now, we have a real issue in this country with care, dare I say it.

Forty thousand homes are sold every single year to pay for care. And the reason that is, is because those properties are owned jointly. Because normally what happens is properties owned jointly, one person passes away, the property is a pro passes to the survivor, the survivor later on ends up going into care. Because there's no likelihood of that person coming back to that property, the care assessment people look at it and go, Well, you've got a property here that you own a hundred percent of. So that could be sold. That's a real issue.

Andy Graham (23:42.424)

So And do they make you do that, Mike?

Mike Hiner (23:44.386)

Yeah, yeah. If you haven't got the physical cash to pay for that care on a monthly basis, they're going to start looking at the assets that you own 100% of. Because you can sell a property that's you own 100% of. So what we're always saying as part of our planning is actually, you know, the way that you should always own your property with somebody else is tenants in common. You own it 50-50 as a married couple, which means I own 50% and my wife owns 50%. Now, because I physically own 50% at this point, I can actually, through my will, divert my 50% into my trust at the point that I pass. So that's again what we would ultimately advise you to do. So when I die, my 50% half of the house goes into my trust. It's fully protected in my trust. 

Now, my wife would still be the first line beneficiary. The difference is she does not own my half. My trust owns my half. But because she's a trustee and a beneficiary, she's still free to live in the property, do what she wants to do, sell it, do whatever she needs to do. But if she was ever to go into care later on, well, now they could only assess her half because she doesn't own a whole thing.

It also stops the property from being sold. You can't sell half a house. So the maximum they could ever come after is her half. Not my half. My half's now protected. So we've now managed to stop that property being sold purely to pay for care. It does not mitigate the care bill. That's really important to understand because a lot of people think, that's great. I'm going to pay the care bill. No. If you got assets over 23,250 pounds, you're going to pay the care bill. What we're saying here is actually, I died.

So why should my asset, my half of the asset, also be included in the care for his bill? Because I've already passed. It's my wife that's gone into care. So really it should just be her assets that are used to pay for the care bill. And we do that by tenants in common. But remember, tenants in common can also be an unequal split. So it hasn't always got to be 50-50. So I could own the property 1% and my wife could own it 99%. And that's fantastic, for instance, if you've got a high rate income tax payer and a low rate income tax payer.

As the owners of the property. Because if you've got a buy to let property and that's receiving an income every single month, and you're just splitting that income and the person who's the high rate taxpayer is paying 40% of that income away, well, that doesn't make sense at all. You might as well do an unequal severance of tenancy, ninety or ninety percent and ten percent, let's say, ninety percent of the income or a hundred percent of the income gets paid to the low rate taxpayer, and the high rate taxpayer doesn't receive anything.

Andy Graham (26:04.122)

If this was a game of bingo Mike, I'm doing very well because I have a number of properties that I own jointly outside of business partnerships. And none of them are owned under that sort of tenants in common structure. They're all all owned jointly and stuff, including stuff I've got with Gemma. So I might be on a winner today for all of the wrong reasons. But thank you for explaining that. That makes a lot more sense. And I guess what I knew what it was, but I never really understood some of the practical benefits or implications of it. And that really sort of helps clarify that. So if someone owns a very sizable portfolio, then how significant? And I know that this will be the big one for a lot of our listeners, how exposed, how significant could their tax exposure be if they don't have things structured in the right way?

Mike Hiner (26:55.81)

Well, I mean, massive if you own a massive portfolio like that in your own names, you're gonna have a real issue, A, with capital gains, but also with if you start selling those properties, but also with inheritance tax. Inheritance tax is the big one you for yourselves because you know that obviously forty percent of what you've got in your estate over the allowances, you're gonna pay an inheritance tax at the point you pass. And pensions have been brought into that as of next year as well. So it's a real issue for people. So your allowances, everybody has three hundred and twenty five thousand.

Everybody has that. That's your lifetime allowance. Now, some people will also qualify for what they call the residence nil rate band, which is an additional allowance on top of your nil rate band amount. So the residence nil rate ban was brought in about kind of I suppose it must have been about eight, nine years ago. It was phased in. And it's at its top rate now of 175,000. So you qualify for the residence nil rate ban. If you own a main residence, which you live in, it's got to be your main residence that you live in. And your total estate value has got to be below two million, two million and below. 

The reason they brought it in was because they felt that people were actually being drawn into paying inheritance tax purely based on the value of their main residence, where they live in the country. And they thought, well, actually, that's probably a little bit unfair. So we'll introduce this residence nil rate ban, but obviously when they introduce these things, there's always, well, there's a caveat to it. So one of the caveats is obviously the value of the estate, the total value of the estate must not be over two million.

And you must also have lineal descendants. You must have children ultimately that that property is going to be left to. Now, there also the residence nil rate ban tapers away at a pound for every two pounds that you're over the two million mark as an estate value. So at 2.35 million, you're gonna lose the lot and you'll be back to your 650,000 as a married couple as to what your allowance is. So if you've got five million pound property portfolio, you're not going to get the residence nil rate banned. You're going to have an allowance of 650,000. And anything above that, you're going to pay 40% tax on when the second of you passes. Right. So now we're into the whole kind of well, now properties and such like are going to need to be sold, as it were, to pay this bill. Because you've also got to remember that HMRC is the first line beneficiary to your estate. And what I mean by that is that they get their inheritance tax. Before anybody else benefits.

Andy Graham (29:14.734)

And how long do you have to pay, Mike? If the second of you dies, how quickly do you have to pay that inheritance tax bill? Six months. Six months. So if you owed so again, I'll just in my personal case, the value of my portfolio is substantially more than that threshold. And but what I could also caveat is that it some of it wouldn't be that easy to sell because some of it they are are big and chunky and you need a bit of time on the market and you need preparation and you well. Dare I say you need a good market, the revenue probably doesn't care because they just want their money. But does none of that matter? Is it just a case of do you have to just sell it?

Mike Hiner (29:52.278)

No, well, I mean, ultimately, if it's not paid within the six months, you get fined. And then you you start adding interest ultimately. So it's one of those things where if you've got a portfolio or you've got wealth, you really need to know the number. You need to know what that IHT number is. And that's important. So as a business, when we talk to business owners and portfolio owners and such like, one of the things that we offer here at Strategic Asset Protection is what we call a tax report. So we will look at your businesses, your wealth that you've got.

And do what they call a tax report. And the tax report is ultimately about understanding what your inheritance tax liability is, understanding what your capital gains liability is, and any stamp duty as well. Those are the main taxes that we look at really, because it's important to understand exactly where you are at the moment, where you sit at the moment from a tax perspective, but also then to kind of think about well, what's the goal going forward? What are you looking to achieve with regard to this? Because only by knowing where you're starting from now. To where you were looking to go, can the solutions at that point be born? And now we're talking about things like incorporation. We're talking about group structures. So setting up a limited companies within the group structure, holding companies, family investment companies, all that kind of stuff. Because if you've got significant properties, that's the sort of structure that you need to have those properties sitting within, Dara said, not in your own personal names, because then there's things that can be done as a way of potentially mitigating some of this IHT or stopping the clock, for instance, so stopping the growth. From continuing to be in your estate.

Andy Graham (31:21.518)

So I definitely want to ask you about company structures. But before I do, in terms of your inheritance tax liability, if you have put stuff in trust, does that move it outside of your inheritance tax liability or not?

Mike Hiner (31:38.464)

No, so well, again, it depends. There's always depends. So I could today if I wanted to, there's a couple of ways that I could reduce down my inheritance tax liability. So I could today, but again, you've got to factor in if you're gifting property, you've got to factor in the capital gains. Because again, if I just transferred a property into a trust as potentially capital gains, now there is what they call holdover relief. So if I for instance had a buy to let property, and let's say that buy to let property was valued at three hundred thousand.

There was no mortgage on it, it was 300,000. What I could do at that point is I could transfer that buy-to-left property into a what we call a gift trust. I could gift it into a gift trust. Now, in order for the value of that property to leave my estate, I can have no benefit from that property for the next seven years and thereafter as well. But it's seven years. You must have heard about the seven-year rule. So there's a seven-year rule when you gift something, you can't benefit from it. After the seven years, the value has then left your estate for IHT purposes.

Andy Graham (32:35.49)

Well, I heard about this, but I had no idea why it was seven years. But now I understand because it is essentially to stop you benefiting from the movement of the value of that asset or whatever it is.

Mike Hiner (32:48.364)

And it also stops you from just transferring it out today.

Andy Graham (32:51.2)

Yeah, of course it's everybody would go and do, wouldn't it?

Mike Hiner (32:53.506)

I'm gonna transfer all this stuff. I'm gonna sign it all over to my children. Now it's not in my estate. And government don't like that. So that's why they set out the seven-year rule. So you've got to survive for that full seven years. So it the inheritance tax rate tapers away over that seven year period. So it stays at 40% for the first three years and then it reduces by eight percent thereafter until after the seventh year when the value would then be outside of your estate. But you cannot benefit. That's the other thing.

Andy Graham (33:17.368)

So there's no capital gain on that movement to pay.

Mike Hiner (33:20.28)

There would be. Well, two ways that you can do it. So I could transfer the property into the trust now today and I could pay the capital gains. The other option I've got is to do what we call a holdover gift trust. So I could put that property into the holdover gift trust and I could use holdover relief to say, actually, I understand there's capital gains to pay, but I'm just not going to pay it at this point in time. I'm going to defer it to a point in time. So next event ultimately. So that's what that allows. So it but the issue with that as well is that you've crystallized the gain at that point.

Yeah. So what I mean by you crystallized the gain at that point is that a lot of people don't know this either, is that when you die, if you've got a capital gains liability on any of the assets that you own at the point that you pass, your capital gains liability will die with you. So if I've done the holdover relief at this point and I've crystallized the gain and said I'm gonna pay it, but I'm gonna pay it down the line, well, it's still gonna be paid, even if I die in the meantime. Because I'll crystallize it as the gamble that I'm taking, as it were.

Yeah. But had I died, then the capital gains liability will die with me because those assets will pass into either my death planning trusts or onto my beneficiaries at the rebase debate. You know, the sorry, the new rebates value, say it. So what the value is today. That's what will pass over. So if my children, if I pass those properties over when I pass, as it were, my children held on for them for another four or five years after they inherited them, well, then they'd start accruing their own capital gains liability. But my liability would die with me.

Andy Graham (34:48.12)

So are there then some there are clearly some decisions that should be made with inheritance tax in mind, but then there are also considerations for things like capital gains that you need to consider at the same time, basically.

Mike Hiner (35:02.198)

Capital gains is massive. Capital gains is a tax of choice. You choose to pay capital gains because you choose to dispose of the asset. This is the other thing. So we say to a lot of our clients, because a lot of people will say, Well, I'm gonna sell this property and buy this property. And it's just like, Well, why are you doing that? Why don't you just take the money out of that one and buy that one and keep that one? Because then you're not paying the capital gains. You only pay the capital gains on the disposal of the assets. So yeah, it's a major thing to think about. And that's why the tax report is so, so important, because it gives you the potential solutions as to what's possible for yourselves and your own situation. Will incorporation work? Can we get these properties into a limited company? Because if you can, well, brilliant. It's always better to have it in a corporate structure than in your own personal names. Always.

Andy Graham (35:45.152)

Okay. We touched very briefly on company investment structure. And I said I had a few questions about that. So I'll use myself as an example, Mike, and the way that I have done this, rightly or wrongly, for a few reasons, I decided to implement a group structure with a kind of the businesses that I own, with all of the SPVs, if you like. Some of them hold assets, some of them are trading businesses sitting under there. And there are different some of those SPVs under my holding company are partnerships. There are a number of tiers to some of the companies because of freeholds and leaseholds and things like that. So there's quite a little bit, and it looks like a tree drawn out on paper. But I did that because it felt like A, it was a much sort of cleaner and tidier solution. And I could sort of hide everything just up to the top. I was really struggling getting money out of my company to then put in other companies. And obviously it was.

Was it a director loan or was I crystallizing some sort of you know a dividend or or something like that? And this has really helped me move money around much more freely and actually keep as much as I can within my company structure. So avoid a lot of leakage. But then I became aware of things like family investment companies and stuff like that. So can you just, from your perspective, Mike, just tell us how you think about company structures and the sorts of things that the average property investor should be thinking about and whether or not within that thought process it should be family investment companies as well.

Mike Hiner (37:11.894)

Yeah, indeed. I mean, the important thing to remember when you've got a group structure is that obviously a property business is an investment business. So it doesn't qualify for business relief. So you've said there that you've got elements that are a property based and you've got also trading businesses. The important thing, and the reason again as to why you would want a a group structure is we don't want to be mixing those assets. So we don't want to have a trading business that's also got investment business elements to it because you're going to taint the reliefs. So at the moment you've got two and a half million pounds worth of relief.

Tax-free relief, inheritance tax relief on any trading businesses. It used to be obviously unlimited. It then changed to a million, didn't it? And then under pressure, obviously they've increased it to two million per shareholder. So, and that's important that we protect that two and a half million. So again, it's demerging things to make sure that your group structure holds a company that's got the properties in it, a company that's got the trading elements to it. That's really, really important. And then you've got all the shares are held by your holding company, ideally. But the other great thing with that is that you can move money around it.

Completely tax free. So you can also offset losses and bits and pieces against the structure as well. So that's the other great thing with it. So you've got a company that's doing really badly over here, but another one that's doing really well over here, then because it's a group structure, you can move the money around and the losses around it and great. But the next part to add on to that then would then be to bolt onto which would be the family investment company. So the family investment company really, a lot of people think that it's an actual is another company, but it's not. It's just really a change of share class. 

So the shares that you own ultimately form part of your estate for inheritance tax purposes. So if you've just got a holding company and all the shares are owned by you personally and bits and pieces and all the value of those shares all sit within your estate for IHT purposes. But if you do a holding company, what we can then do is change the share classes. So we can freeze your shares, for instance. So your shares then, what it then does is it stops that IHT clock. It just freezes it at this point in time and this value in time. So we've still got to do some work on trying to reduce down your IHT

Over the rest of your life because of the wealth that you've already created. But it just means that any growth going further would happen in another share class. And you can have those shares ultimately given to your children if you wanted to, but we wouldn't really recommend that. We would ideally have them going into a trust. Because if you put those shares into trust, as the business continues to grow, well, it's growing outside of everybody's estate for IHT purposes.

Andy Graham (39:31.054)

And so there's no capital gains or inheritance due on that additional growth.

Mike Hiner (39:35.618)

With no inheritance tax on the growth. No. No, indeed. But yeah, it's a perfect solution. You can still take your dividends and that's new, poking rights and all the rest of it. You're still in full control. It just means the growth is happening somewhere else, which is absolutely perfect.

Andy Graham (39:48.046)

Okay. So actually then that impresses the need to think about these sorts of things sooner rather than later because in some respects there is actually a ticking clock and the problem is just kind of getting worse by the day, by the deal you do.

Mike Hiner (40:01.246)

Our issue really is that people tend to come to us for these structures once they've already created the wealth. Like I said there, I mean, if you've already created the wealth, yes, we can stop the clock by changing the share class and introducing the family investment candidate, but we've still got the wealth here in the share value. So there's still things that we need to consider, as it were, to try and reduce down that wealth over your rest of your life. Whereas if you set the structure up before you create the wealth, well then fantastic, that's the best place to be.

Andy Graham (40:27.0)

With a family investment company, something like that, are there any practical implications of having something like that in place? Or is it really just another limited company from a lender's perspective and it's fine to sort of as long as they're happy with tiered, I suppose, group structures, is it okay to keep buying and

Mike Hiner (40:44.928)

It should be fine. Absolutely. But again, that would be part of the setup process would and the understanding of what you're trying to do going forward because the structure's got to work for you. It really has got to work for what you're doing and what you're trying to achieve in the future. So but again that that's all part of and again, it's really, really important that you take proper charred tax advice on that. So we've got chartered tax advisors that we work with that do our tax reports. Because again, it might not be that a family investment company is for everybody. That's where the tax report is important because it's bespoke to yourselves. So

Andy Graham (41:13.248)

Okay. So there is definitely a we're talking largely about structuring, we're talking about inheritance, we're talking about wills and trusts, but there's from a purely financial perspective, a sort of a real understanding of your asset and wealth right now. I guess maybe other specialist tax implications as that someone might be exposed to that needs consideration.

Mike Hiner (41:35.168)

It's really, really important to understand that when we talk about estate planning, there are two defined elements. And that's really important for people to understand. So there's what they call the death planning, which is the bit we talked about before, the wills and the trust structure and such like. That's about really catching your estate at the point that you pass, catching it and passing it on in the best way possible. So it's not going to affect anything you were doing at this point because it only comes to life at the point that you pass. But that's death planning. And we always do the death planning first. That's also important to understand.

Because dare I say it, I don't know when you're actually going to pass. It's all very well trying to mitigate some inheritance tax, but if we haven't got the death planning sorted in the background, we're just compounding the problem, really. So we do the death planning first, get that sorted, and then we would then have that secondary conversation about what we call lifetime planning. So lifetime planning is about, well, I understand I've got a bit of an IHT liability here and I've got all these properties and I've got all this wealth, as it will. What am I doing now today while I'm still alive to start mitigating some of this stuff? Because that's the only time that you can actually do it. Is while you're still alive. The point that you die, that's it. The music stops. We're now into the death planning.

Andy Graham (42:39.466)

Okay. So I guess I mean, Mike, I have found this fascinating. I've been investing in property and and running businesses for nearly 20 years now. And I would like to think I've got a pretty good sort of base of knowledge when it comes to what I do. But admittedly, this whole subject, I have found this conversation fascinating because I know so little about it and I like to discover things. And actually I can see so many things here that I need to do.

In a relatively short space of time to probably improve my position across all of these fronts, really. But I want to ask you a question to wrap things up today about the perhaps the more immediate considerations if something were to actually happen. And I guess I'm asking this question from the I had a business partner who died, unfortunately, a number of years ago, very sort of unexpectedly, very tragic. Fortunately, we had a shareholders' agreement and things like that set up and the way that it was managed from a business perspective was about as good as it can be. 

However, powers of attorney literally, I sometimes I think like where Gemma would have no idea how to log in into the business or the bank of to where to find any of the information. Sometimes I don't even know my own password. So how on earth is she ever gonna find out? If I have an issue with the bank, I can't even imagine what sort of an issue she might have. And I have a lot of money in some of my bank accounts between my investment activity. Is there an activity that we should also be thinking about here? Just like really rudimentary stuff that possibly most of us have not done that we should do.

Mike Hiner (44:15.456)

Well, power of attorney is a massive one, to be fair. Hardly anybody's got a power of attorney, but they don't really understand the importance of it. That's the thing. Most people think, well, I'm married, so my wife can make decisions to me. It doesn't work like that, unfortunately, unless you've got that legal registered power that says that you've given her the permission to do it. Then power of attorney is massively important. But also a lot of people don't realise you can also have a business power of attorney. So I run my business here as it were. I've got two business partners, my wife wouldn't have a clue about what goes on in the business here.

So we've also got business power of attorneys. So I've given my business partners power of attorney over myself to be able to make decisions about what goes on here purely in the business, not about what goes on at home and my health and all that. That's taking care of my family. But here in the business, then it that's important. But also there's things like a lot of people don't understand about cross-option agreements. So you could have a cross-option agreement if you've got a business partner and you both run a business together, as it were.

And I died, like I said before, my wife wouldn't really want to be getting involved in the business. She would much prefer to have a nice little payout for my value of my shares. And that's really what a cross-option agreement is. It's a life insurance policy that's set up. You set up one, I set up one. If I died, the cross-option agreement would then be activated. The life insurance would pay out so into the business. You, as the business owner at that point, would give the cash to my wife, and my wife would transfer back to you the business shares. But we would have those shares ultimately go into a business trust.

So we don't want the value to go back into your estates. Because my you're giving me my 50% of the shares, just the value of your estate, which is counterproductive. So we'd have those business shares going to a trust where you could be the trustee and the beneficiary, but they don't form part of your estate rights deep. You still control the shares and do what you need to do and take a dividend from them and such like, but you don't own them.

Andy Graham (45:57.41)

Well, I think I may have just got my bingo because I looked across option agreements because I do have a lot of value in some business partnerships and absolutely the the conversation about what if something were to happen to one of us, like how do the remaining sort of parties to this, or wives, spouses, how do they potentially benefit from this? Or how do we deal with, especially when it comes to property, how do we deal with almost a cleanup exercise? Just being able to get somebody out of that business who, A, probably wants nothing to do with it, B, has no idea.

How to even run an operator. C could be a massive liability. D has an implication on lending and all sorts of things, cross-option agreements within a conversation we had. But I'll admit, started the conversation, had a look at some policies. Understandably, it's expensive and it's a bit of a moving target because it depends on the value of your what you're trying to ensure. And the idea was just overwhelming. And I just thought, you know what? I should probably start with something simpler. And in all honesty, that is how I found you because I started to show an interest in things like death planning. And actually I did do a couple of things. I did get myself my own life insurance policy and my wife. And I got us covered. Mine's a little bit different because I'm self employed, but critical illness policies as well. Because I was worried that if something happened, very quickly some very important income streams would just disappear and that would only be sustainable for so long. 

So I did do some stuff, but that's how I came across you because I started to lean into this. And I think as someone who knows clearly very little about this subject, it is overwhelming.

Mike Hiner (47:34.914)

You're not wrong. It is. A lot of people think it's so overwhelming. I don't know where to start, so I won't bother. But insurance is one of those things that is so underrated. It really is. You know, a lot of people think, What am I gonna do about my inheritance tax liability? Well, just insure it if you want. I can take the value. If you made a gift, for instance, today, I could take that value out of your estate on day one if you insure the liability, which is the seven year bit. If you insure that for seven years.

Mike Hiner (48:02.368)

The value of what that inheritance tax would be over that seven-year period. Well, it's gone out of your state day one. There's so many benefits to it, but it's getting the right policies. That's the thing. So, for an inheritance tax point of view, there's no point me having a term insurance policy. Not that I'm an insurance policy, I'm not advised to talk about it, but there's no point me having a term insurance policy because that's based on me passing away within the term. So I'd need a whole life insurance policy to make sure that it pays out at the point that I do actually pass. And it's written into trust as well. That's a massive thing, as well. That the life insurance must be paid into trust. Because otherwise you're just compounding your problem again 'cause it'll pay into the estate.

Andy Graham (48:35.384)

I did set mine up into a trust, but it was a probably a fairly standard is it called the discretionary trust? I have no idea what I'm really talking.

Mike Hiner (48:42.442)

about as long as it fees into a trust, that's the main thing, because all your beneficiaries are going to do is use that money to pay off any debts and bits and pieces, it it's fine. The important thing you can get out of the estate.

Andy Graham (48:52.558)

Mike this has been a fascinating conversation and it's been the kick up the ass that I certainly needed. And I suspect, highly suspect that a large proportion of our listeners today will be thinking, I should really give this some thought. For everybody listening, I would highly, highly, highly recommend you go and and follow Mike. That's where I started to sort of learn a bit more about this stuff. And I think Mike, you've got a great way. And today's conversation has a beautiful example of simplifying what can be a very complicated and overwhelming subject. So thank you so much for coming on and sharing all of your expertise and wisdom. And I suppose just highlighting some of the considerations, some of the risks, but also some of the solutions. 

For everybody listening today, Mike, please tell them where they can go to find out a little bit more, maybe even have a discussion about the services that you offer and how you might be able to help.

Mike Hiner (49:46.126)

Yeah, so I mean, most people know me from there I say at the social media stuff. So I mean we got a very large following across social media platforms, across the TikToks, the Instagrams, the Facebooks, all under the channel of the asset protection guy. That's who I'm known as, as it were. But behind the social presence is a real business. So we've got strategic asset protection. We've got a website, www.sap-legal.co.uk.

There is a world of information on the website. We've got all sorts of guides. There's an ebook on there. There's all sorts of stuff. Lots of free content that you can download about businesses and structuring and family investment companies and wills and trusts and mastering power of attorney. Absolutely everything is on the website. You can book appointments on the website as well. Speak with one of our advisors, completely free of charge to get a full recommendation for your own estate planning and such like. But that's where we would direct you to. Go to the website. Engage with the content as it were. And if you want to book an appointment, book an appointment and get all the information you need. Absolutely. 

Andy Graham (50:44.238)

Mike, Thank you so much. It has been an absolute pleasure, a fascinating conversation. And I'm incredibly grateful for the time that you spared today to share all of that insight and expertise with us. Thank you so much.

Mike Hiner (50:55.723)

You’re welcome. No worries.

Andy Graham (51:03.862)

That is it for today's episode, guys. Thank you for tuning in. Big thank you to Mike for sharing all of his wisdom and insight with me today. I genuinely think that that was one of the most important episodes that we've recorded on the show. Look, nobody likes to think about death or illness or losing capacity or paying more tax than we really want to. But it's clear that every property investor needs to have a plan. If you've spent years building a portfolio, if that is what you're doing now, then it deserves protecting. 

Hopefully, today's conversation has shown you that even having a simple will is just part of the picture. The way that your properties are owned, then your company structures, your trusts, lasting powers of attorney, succession planning. It all needs to work together if you want your money to be available and be able to use it in the way that you want, and or if you want the money that you build and the wealth that you generate to end up in the hands of the people that you want it to be with at the end of the day. It's complicated stuff, but it's very, very important. 

If today's episode prompted you to start thinking about your own circumstances, I would encourage you not to put it off. I certainly won't be. Take action now. Save yourself, save your family, huge amounts of stress and costs and uncertainty in the future. Now, as always, if you have enjoyed today's episode, please, please, please subscribe to the show. Please leave a quick review. Let us know what you think. Hopefully, we are worthy of five gold stars. It helps spread the message of the podcast, it helps us reach more and more people. 

And it does give us that warm, fuzzy feeling inside. But in all seriousness, it's great to know what you guys think of the show. And it helps us keep refining what we bring to you. Now, if you are investing in HMOs yourself, make sure you head to theHMOradmap.co.uk. Go and get yourself signed up as a member and take advantage of everything that we've got to offer. And if you want to come and work with me, well, just head to the show notes. There's a video link there. Go and watch it and just find out what working with me is all about. And if it's the sort of thing that you think you need, then you can put yourself a free strategy call with me right now. Thanks for listening, and don't forget that I'll be right back here in the very same place next week. So please join me then for another instalment of the HMO podcast.