Reducing your IHT liability when you pass your assets to your family
A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries.A trust is a way of managing assets (money, investments, including quoted and unquoted shares, land or buildings) for people.There are many types of trust and many purposes for their creation, including:
to control and protect family assets
when someone’s too young to handle their affairs
when someone can’t handle their affairs because they’re incapacitated
to pass on assets while you’re still alive
to pass on assets when you die (a ‘will trust’)
The main types of trusts are:
- bare trusts
- interest in possession trusts
- discretionary trusts
- accumulation trusts
- mixed trusts
- settlor-interested trusts
- non-resident trusts
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The trustees are responsible for reporting and paying tax on behalf of a trust. The tax position varies depending upon the type of trust. In respect of a bare trust, the beneficiary is responsible for their own tax arising from income and capital.
HM Revenue & Customs provide a number of examples of the different types of trust and their uses – see the .gov website page: https://www.gov.uk/trusts-taxes/types-of-trust
Trusts can enable you to give away assets but retain control over the assets. Depending upon the type of trust, assets given away may be excluded from your Inheritance Tax (IHT) estate.
Contact us now to discuss whether the establishment of a trust can reduce your IHT liability and/or enable you to pass your assets to your family.
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