Inheritance Tax Trusts

What are inheritance tax trusts?

Inheritance tax Trusts are devices where an individual can make gifts for the benefit of others, and also help to avoid inheritance tax. Once the gift into the trust has been made, this cannot be reversed. The person making the gift (called the settlor) appoints trustees to look after the money or assets in the trust. These trustees have duties to look after the assets in the trust for the benefit of the beneficiaries of the trust.

The benefit of using trusts with inheritance tax planning is that these gifts can pass outside of the estate of the settlor, and therefore help to avoid inheritance tax.

The use of inheritance tax trusts is a very complex area, and we would always recommend that you discuss your situation with one of our professional advisers before taking any decisions.

This is especially true at the moment, since in the budget of March 2006, the Chancellor announced that certain inheritance tax trusts will be hit by new laws to tax them. This could even apply to trusts set up in the past, which means that existing schemes could be hit. However, the details have not yet been published, so we cannot say for sure yet which inheritance tax trusts will be hit.

However, inheritance tax trusts, if used correctly can result in avoiding inheritance tax completely in some cases.

The main issues to bear in mind when considering trusts for inheritance tax planning are:

How much control do you want over the assets concerned? The placing of the assets into trusts can mean that you lose some control. However the settlor can appoint himself as trustee.

Whom do you want to benefit from the trust? It is important to decide who the beneficiaries will be as the trust will not change once it starts.

We can help you to understand how the inheritance tax trusts affect your tax situation before and after death.

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Why not contact us about inheritance tax trusts?