Dealing with the UK inheritance tax is something that you will eventually have to deal with if you are writing a will. However, did you know that leaving property in trust for children is actually one of the best ways to help you cut or even avoid your inheritance tax? This is a legitimate fact and you can actually confirm this with any reputable UK executry solicitor. So how can leaving property in trust for children cut your UK inheritance tax? Let us discuss:
The use of trusts to cut the inheritance tax in the UK is an established practice
In UK executry law, it is actually an established practice to make use of trusts in order to cut the UK inheritance tax. However, before this can be done, you must first meet a few requirements.
Let us first take a step backwards and talk about trusts in general before we move on to leaving property in trust for children. So what exactly is a trust? Basically, this is a type of arrangement that allows a person to leave money, property or investments to someone else, who will look after them for the benefit of a third person. There are two main roles involved in the trust arrangement. There is the trustee, who is the person who owns the money, property or investments held in trust. The trustee’s job is to manage the assets held in trust properly for the benefit of the other role, the beneficiary. The beneficiary is the person for whom the trust is set up for. The trust is generally created because the beneficiary is still incapacitated to manage/hold the properties/assets held in trust yet. An example of this would be your minor children.
Trusts transfer ownership
If you are actually serious about leaving property in trust for children, then you should also know that after certain conditions are met, the properties held in trust are now effectively no longer yours. The establishment of the trust also transfers ownership of the property. However, this is the good news about leaving property in trust for children. Because the properties held in trust are no longer yours, then they can no longer be counted as part of your estate when you die for the purpose of computing the UK inheritance tax. Furthermore, leaving property in trust for children allows you to retain some form of control over the properties and keep them safe while the beneficiaries may not yet be fully capacitated to hold the properties themselves.
The trustee cannot do anything to the properties held in trust that would jeopardize them to the detriment of the beneficiaries.
Types of Trusts
However, there are several different types of trusts. If you are thinking about establishing a trust, it is best to talk to a reputable executry solicitor for more detailed information on the subject. The price of establishing a trust would depend upon its complexity. There is a bare trust, interest in possession trust, discretionary trust, mixed trust, trust for a vulnerable person, and others.