CAPITAL SHRINKAGE

Poverty Bay Herald, Volume LIX, Issue 17951, 1 December 1932, Page 9

CAPITAL SHRINKAGE

LORD INCHGAPE’S WILL DEATH DUTIES AND DEPRECIATION 1 LONDON, Oct. 9. 'the will made by the late Lari of Inchrape has been the cause of a great deal of discussion in the past few days. Lord' luehcape was an extremely able l man of affairs, a far-sighted and notoriousty hart!-headed business man. In his will made in October, 1929, lie in- . streets that his widow is to receive an income of £100.030 free of taxation and an additional £5003 per annum if she wishes to change her London residence. He bequeathed certain legacies absorbin'’' probablv £70.009 to £BO,OOO, and directed that the balance of the income of the estate should be divided equally among his children. EFFECT OF DEATH DU TIE® Allowing for the income to be received, on a a rer cent, basis, it would require that the capital remaining after payment of death duties and legacies should be £4.000,0C0 in order to produce a gross income of £200,000 per annum, equal approximately to £IOO,OOO free of taxation. As the death duties would amount to 50 per cent., it has been estimated that Lord Inchcapc must, at the tune he signed his will, have envisaged his estate at some substantial sum in excess of £3,000,000. His will has now been proved at £2,147.000, equal to a net figure, after paving duty, of roughly £1,000,000. Obviously, this will not- produce a. net income of anything like £IOO,OOO on a 5 pep cent, basis, and, of course, a substantial sum of this residue must lie absorbed by legacies and assets not producing income. INTERESTS IN THE EAST The answer to the riddle is not entirely to be found in the reduction in dividends and values which have been taking place since the will was made. These, of course, have been tremendous, and as large in shipping as in any other field of commerce. But Lord luehcape was not merely a great shipping man, but a great merchant; he wa3 a man of largo affairs in India and the East before bo ever touched the shipping business. The distribution of his wealth is given

Estate in Scotland.. £82,449 In England £470,359 Elsewhere £1,571,898 The last item presumably will include his enormous interests aoroad. About a vear before his death, Lord Itichcapo fold a friend that he was interested in and concerned with something like ‘.<45 partnership and semi-part-nership businesses out East, and that by every mail he sent to the headquarters of each of them a communication of some sort, even if it was only a lino or two of a personal character. Businesses of this sort are obviously not 5 per cent, investments, nor are they valued on such a basis. Their profits would not be valued for capital purposes at anything like 20 years’ purchase—possibly not 10 years. INCOME FROM THE ESTATE

Ip justice to the reputation of Lord Tnchcape as a man of affairs, it is worth while pointing out this aspect of the matter, as it is quite possible that the income which will be produced by the estate may l.e considerably larger than would appear tc be the case. Lord Inchcape’s will illustrates the working of the death duties iu an extraordinary way. It is assumed that the value of Ids estate in 1929, the year in which lie made his will, was £8.000,000 and he had died at that time the State would have taken, say. £4,000,000. If Ids estate consisted mainly, or'even largely, of assets of a commercial character, only capable of slow realisation in a falling market, the residual value to-day would probably not have exceeded a couple of hundred thousand pounds, and conceivably; as has happened in other cases, would'have been worth nothing at all. In the case of another large estate, thfit of Lord Dewar, the immediate shrinkage of values following on the payment of death duties —the latter combated, of course, on the values obtaining on the day of death—is understood to have reduced a £5.000,000 estate to the neighborhood ■of £1,000,000 in less than 12 months.

It is not surmising that the widow of another very rich man said recently that she had not received a penny from her millionaire husband’s estate 12 months after his death.