Setting up a Trust is a flexible way of giving away assets without passing them absolutely to Beneficiaries. In an effort to reduce the occurrence of periodic and exit charges, is it best advice to use Multiple Trusts settled (signed) on different days in accordance with s.62 IHTA 1984? If so, why?
Are there other reasons for recommending the use of Multiple Trusts?
There are many reasons your clients should consider using multiple Trusts. They can ensure privacy and separation for all parties. Different beneficiaries and different Trustees can be appointed to individual Trusts, resulting in better autonomy and management. By simplifying the management of the Trust it can also reduce costs. A group of Trusts is much simpler to manage than a single Trust with many purposes, mixed assets, multiple Beneficiaries and more potential for conflict amongst them. Multiple Trusts can also be extremely beneficial in the case of divorce, and can further reduce the risk of funds being included in any financial settlement.
How many Trusts does your client need?
There is no limit as to how many Trusts can be created. Ideally, you want to create as many Trusts as you require for each significant asset or purpose.
Current legislation (s.144 IHTA 1984) allows clients to use close family members (probably children and grandchildren) to change the Discretionary Trusts settled by a Will to Interest in Possession Trusts. Interest in Possession Trusts do not generate periodic or exit charges. The Interest in Possession Trusts can then be changed to Relevant Property Trusts. These changes can be done on different days so the Relevant Property Trusts are not related settlements under the new s.62A contained in the Finance Act 2015.
Should this be completed in Lifetime or Post Death?
The work above (using s.144) is best done post death, but must be completed correctly and within the appropriate time scale.
It is only after death that the exact number of close relatives and the most appropriate close relative(s) to use the Interest in Possession on the Discretionary Trusts established by the Will can be ascertained.
The payment of periodic and exit charges (if any, after careful planning) is small compared to the potential 40% inheritance tax payable if the assets are in the estate of your beneficiaries.
Join our team of technical experts to find out more.
Click the links below to register for our FREE Webinar.
Register now to reserve your space
All webinars are held at 10am until 11am
Register on Friday 1st December
Register on Monday 4th December
Join our LinkedIn Discussion group:
Join our LinkedIn Supermen Webinar Group. Our Estate Planning experts will address all of the questions raised during the webinar and any further queries relating to the topics covered. Become part of our growing community of Supermen members. Share your opinions, questions and knowledge with us.
This article was submitted to be published by Countrywide Tax & Trust as part of their advertising agreement with Today’s Wills and Probate. The views expressed in this article are those of the submitter and not those of Today’s Wills and Probate.
