Inheritance Tax Trusts & Trustees
Inheritance Tax is a tax on gifting on death or within seven years of death or on gifting into a trust.
You should be aware that the scenarios described in this article do not cover all possible inheritance tax planning issues and you should seek our specific advice in relation to your particular circumstances.
The Finance Act 2006 placed all trusts with a few exceptions for Disabled Trusts and Trusts for Bereaved Minors as chargeable lifetime gifts if over the nil rate band allowance (currently £325,000), i.e. Inheritance Tax is payable at the lifetime rate of 20% (“the relevant property regime”). Previously all trusts except Discretionary Trusts enjoyed the potential exempt transfer (‘PET’) benefits, i.e., if the settler lived for seven years after the gift there was no Inheritance Tax irrespective of the amount gifted.
Existing Trusts If you have set up, proposed in your Will or have a current interest in Accumulation and Maintenance trusts or Interest in Possession (life interest) trusts that do not meet the 2006 more restrictive rules for such trusts please contact us for further advice. Transitional rules were in place to provide for a period of adjustment up and until April 2008.
A bereaved Minors Trust may be created by Will or Intestacy by a natural or adopted parent, step parent or legal guardian. The bereaved minor will be fully entitled to the income and capital no later than age 18.
An 18-25 Trust again created by the Will of a deceased parent for children aged under 25 years who take absolutely at or before 25 years. A special IHT charge of 0.6% per annum (maximum 4.2% for full period) is imposed on the advancement of capital and on absolute vesting of the trust assets for the ‘privilege’ of retaining the property in the trust between ages 18 to 25 years. You may decide a tax charge of 4.2% is a price worth paying to safeguard the underlying trust assets while your children mature. Alternatively an absolute gift to the children at 18 will avoid this tax charge.
Immediate Post Death Interest Trusts may be established by Will or Intestacy which vest an interest in possession in a beneficiary or a number of beneficiaries. This trust will be commonly used to provide for say a spouse and bequeath an interest in the trust income or the occupation of property during their lifetime or until earlier termination while ultimately preserving the capital for the children. Whilst the life interest continues there will be no periodic charges but the “relevant property regime” rules apply thereafter unless the subsequent interest becomes absolute.
Powers of Executors and Trustees
You should select sensible members of your family or friends to be trustees of any trusts you create. You should also consider appointing an independent professional to work alongside your relative or friend. Solicitors that are Members of the Society of Trust & Estate Practitioners will have a professional duty of care and have professional indemnity insurance cover to protect the beneficiaries of your trust.
The Society of Trust and Estate Practitioners (STEP) is the leading worldwide professional body for practitioners in the fields of trusts, estates and related issues. Full members of STEP are the most experienced and senior practitioners in the field of trusts and estates. STEP recommend as best practice a standard use of provisions which Wilson Nesbitt, unless otherwise instructed by you or amended to the contrary, will be incorporated into your Will. The relevant paragraph that will appear in your Will is “The standard provisions of the Society of Trust and Estate Practitioners (Northern Ireland 1st edition) shall apply”. See the ‘Standard Provisions of the Society of Trust & Estate Practitioners’.
The information contained in this article is relevant to the date upon which it is distributed; advice given verbally by Wilson Nesbitt is also only relevant to the day upon which it is given. Tax laws change every year and it is the individual responsibility of each Wilson Nesbitt client to ensure that their Will reflects the current legal and tax position. Wilson Nesbitt cannot and do not give any assurance whatsoever that the legal and tax position at the date of death of a client will be the same as at the date advices are given or Wills are executed.
Gilbert Nesbitt & Lenore Rice
Gilbert and Lenore are senior partners of Wilson Nesbitt, solicitors. Gilbert has been a solicitor since 1978 and a partner in the firm since 1982. Gilbert has been a member of the Society of Trusts and Estate Practitioners since shortly after it’s foundation in the 1990s. Lenore has been a solicitor since 2009, a partner in Wilson Nesbitt since 2012 and a member of the Society of Trusts and Estate Practitioners for the last ten years. They share responsibility for the tax, trust, wills and estate administration department of Wilson Nesbitt assisted by six specialists. Either Gilbert or Lenore are happy to have a phone or video call or meet clients face to face (behind Perspex screens) to discuss Inheritance Tax, complex Will planning or other matters in either our Belfast or Bangor offices.
POSTAL WILL OR ENDURING POWER OF ATTORNEY MAKING
We provide you with a free postal information pack on how to make your Wills and Enduring Powers of Attorney by completing and returning a questionnaire to us, receiving draft Wills and Enduring Powers of Attorney from us for you to review, using our phone helpline and then receiving you are ready to sign Will & Enduring Power of Attorney with instructions on how to sign the documents in accordance with the legal requirements.
Take the next step and call us on freephone number 0800 840 9293 or email Wills@Wilson-nesbitt.co.uk to request a free postal Wills & Enduring Powers of Attorney information pack on how you can use our postal service at little cost to make your Wills, make your Enduring Power of Attorney, gift transfer your property or arrange a phone or video call or face to face (behind Perspex screens) consultation with one of our solicitors on making your Will, Inheritance Tax planning, gifting or other tax planning matters.
See our other articles on Inheritance Tax, Making your Will or Enduring Power of Attorney:-
- Making a Will
- Enduring Powers of Attorney;
- Inheritance Tax Personal Allowances & Exemptions;
- Inheritance Tax Residential Nil Rate Band;
- Inheritance Tax Seven Year Rule;
- Inheritance Tax & Deeds of Variation
- Inheritance Tax Business Property Relief;
- Joint Tenants or Tenants in Common?
- Reduce Inheritance Tax by Charitable Giving;
- Standard Provisions of the Society of Trust & Estate Practitioners;