EBS Trustees Ltd - Offering an innovative and bespoke private client service in all aspects of trusts, trust management and estate planning

INHERITANCE TAX CHARGES ON TRUSTS

1. All trusts (except bare trusts) now suffer a 20% tax on a gift to trust if the “value of the gift” is in excess of the Nil Rate Band (NRB).

Example : Gift of £500,000

IHT on £325,000 (NRB) = Nil

IHT on £175,000 @ 20% = £35,000

The “value of the gift” is calculated by aggregating the actual gift with any other gifts made by the Donor in the previous seven years to ascertain if £325,000 is exceeded.

Example : Gift of £250,000 (where the Donor had made an earlier gift to trust of £250,000 within seven years)

IHT on £325,000 (NRB) = Nil

IHT on £175,000 @ 20% = £35,000

2. All trusts now suffer an exit charge when funds are distributed. The rules are complicated but distributions under the NRB may have an exit charge of 0%. Additionally, if the trust is wound up by virtue of all trust assets being distributed during the first ten years, if there was no 20% IHT charge on the money going into the trust, there will, in certain circumstances, be no IHT to pay.

Example : Gift of £300,000 made (when NRB is £325,000) – trustees invest in portfolio of shares which grows into £600,000 just before the tenth anniversary. If the trust is wound up and trust assets distributed within the ten year period (and there have been no other distributions, no added property and no same day settlements), there will be no IHT to pay. However, income tax may be payable on dividends received and capital gains tax paid on gains made.

3. All trusts which continue through their tenth anniversary suffer an IHT charge as at the tenth anniversary. Again, the calculation is complex but it will not exceed 6% of the value of the trust assets as at the tenth anniversary.

If you think this something that may be of use to you or you would just like to have an informal chat then please do not hesitate to contact us.

Nothing on this website constitutes legal advice and EBS Trustees accepts no liability for any actions taken by any individual in reliance of what is written here.

Lanark Care Home funding advice - Glasgow Care Home funding advice - Lanarkshire Care Home funding advice - Edinburgh Care Home funding advice - Scottish Care Home funding advice Carluke Care Home Funding advice Biggar Care Home Funding advice - Motherwell Care Home Funding advice Wishaw Care Home Funding advice Hamilton Care Home Funding advice

Contact Us

EBS Trustees Limited
EBS House
25 Hope Street
Lanark
ML11 7NE

t: 01555 678900   f: 01555 678910

Email:
mail@ebstrustees.com

 

 

Follow us on twitter

EBS Trustees Limited Established 1982

 

Looking for Independent Financial Advice?

 

Will Aid

 

Site Design by DM Web Solutions Ltd © EBS Trustees Ltd