As you may have heard, Inheritance Tax bills have been increasing in 2017, despite the introduction of the residence nil-rate band.
Many people choose to take advantage of gift allowances and other options to reduce the burden of inheritance tax on their family when they pass away. One of these options is to put cash, property or investments into a trust.
A trust is a legal arrangement where you give cash, property or investments to someone else so they can look after them for the benefit of a third person.
Trusts can be effective in reducing the value of your estate, meaning IHT can also be reduced as a result. This is because when you use a trust, provided certain conditions are met, the assets are effectively no longer yours.
A trustee will look after the trust for the eventual beneficiary, meaning it is their job to manage the trust property in a responsible manner.
The beneficiary is the person who the trust is set up for. Usually, this is a child, and the assets held in a trust are held for the benefit of that person.
When you set up a trust, you decide the rules on how it will be managed. As well as this, trusts also have their advantages in that they mean you don’t have to hand over valuable investments or property while the beneficiary is too young.
Some trusts you are able to write into your will, and some trusts you can set up immediately. It’s important to ensure you set up the right kind of trust, in order to reduce inheritance tax effectively.
Trust law is a complicated one, and will require financial advice before setting one up in order to ensure all the steps are followed correctly. If you’re interested in finding out more about reducing inheritance tax, new tax rules and inheritance tax reliefs, talk to our financial advice team. Please call us on 01926 492406 or email us at firstname.lastname@example.org to make an appointment.