Rysaffe Planning

Trusts Discussion
1

I have been asked to review Wills (executed 28th May 2014) for a married couple.
They have an estate comprising of a main residence worth £800k and investments via St James’ Place worth £1.2m. No liabilities. 2 adult children and 3 grandchildren.
Thier current wills give everything to each other in the first instance and then:
12.5% to each child
15% to 5 trusts established on consecutive days dated 24th to 28th March 2014.

Can anyone advise please if these Wills are still OK or should they be scrapped? If they are no good can you recommend what should be done instead please?

Patricia Evans
Wills & Heritage

2

The trusts will be caught by the Same day addition rules, s62 IHTA 1984.

The SDAs take place on the death of a person. So, if a person has created a number of these pilot trusts with the intention that substantial assets are added after their death, under the rules all such trusts will have to be aggregated for the purpose of the IHT periodic and exit charges, with only one nil rate band available.

Now have to factor in RNRB as well and possible tapering if the estate exceeds the £2m threshold.
Also what were the purposes of the trusts - if just to save tax because of the NRB availability to each trust at that time, and not for other control issues, may need to discuss in depth with clients exactly what they want to do with their estate.

There appears to be to reason to scrap the trusts but the amounts going in to them may need to be restricted.

Time to do some IHT calculations.

Andre Davidson
Finantium

3

Hi Patrica,

I assume the trusts are for the grandchildren
? The trusts are established pilot trusts.

IHT 1984 s62 still allows for this type of planning, the trust post 2015 will not benefit from thier own NRB.

I assume the grandchildren are young? The only benefit now is the current planning is likely to reduce the 10 year an exit charge only.

I’d suggest the strategy is sound based on trying to reduce the effects of IHT 1984 s61.

If it’s related to reducing IHT based on multiple NRBs then I suggest a redraft. Pre 2017 death for that to work.

I might suggest an IPDI or 18-25 trust may be a consideration either way.

Richard Bishop
PFEP

4

Good morning Richard

Many thanks for taking the time and trouble to reply - most helpful and very much appreciated. The Wills were apparently set up to reduce IHT based on multiple NRBs so I think a redraft is in order at this stage.

Thank you once again.

Kind regards

Patricia Evans
Wills & Heritage

1 Like
5

Many thanks Andre. Most helpful.

Could I check the following with you please:

Could they put £325k each into the trusts now and wait seven years and put the same amount in again and so on every seven years….? So each time the seven year period lapses that amount falls outside their estate for IHT purposes?

Thank you once again.

Kind regards

Patricia Evans
Wills & Heritage

6

Short answer is yes to topping up, topping up at different times. Also remember that it is not outside the estate for IHT as at the 10 year point periodic charge calculations will need to be made, and tax may be due if the total funds exceed the NRB.

Remember that it may be possible to make use of the annual exemptions as well. Would it be possible to use bare trusts for the grandchildren?

Andre Davidson
Finantium