I have a client who’s windowed, has no issue and is worth around £725,000.
She has three properties: matrimonial home worth around £120k and two rentals worth £140k each, the rest is cash.
She’s looking to create a trust to reduce her potential IHT liability with her main residence, plus around £80k to take £200k out of her estate after 7 years.
If she resides in the family home, but is not a beneficiary of the trust, would it still be considered a GROB and be included in the value of her estate for probate purposes?
Would there be any drawbacks to add a rented property instead of the main residence if so?
Yes for IHT. Unless she pays full market rent to the Trust, income therefore taxed at RAT. No CGT uplift either as she’s not a trust benef so can’t claim PPR on her death.
Trust would need registering on TRS.
If widowed, Does she not have full TNRB so £650K NRB on death? If so £80K takes below current 2 x NRB anyway…
I’m struggling to see much benefit to a Trust, def not with the house.
Thanks for replying Karl
She has the full £650k, no offspring unfortunately otherwise with RNRB none of it would be an issue.
She’s making full use of her annual PETs, has no plans to sell any of the properties and is against any financial products which could reduce her IHT (insurance policies etc).
She’s also against putting a much larger sum of money into trust to bring her well below £650k (her three properties are all in an area where house values are still increasing)
So qualifying AIM investments are also out of the question? 2 year period instead of 7….
Unfortunately yes - she’s dead against involving an IFA or similar which is why a trust holding cash is looking like the only option (although she may invest the funds herself so I will suggest she considers AIM).
Increasing the value of charitable gifts in the will are also out of the question!
Seems to me she’s one of those clients expecting a magic bullet…
some decent lower risk BR strategies out there.
Just think the Trust solution for £80K is over complicating the issue, which may not work anyway with house price appreciation….