How wealthy families keep their wealth.

David Cameron’s father’s will makes interesting reading.

He left a fortune of £2,740,000 from which the ex-Prime Minister received the sum of £300,000, but what is interesting is that:-

  • He appointed his children as Executors and Trustees.
  • He and his wife owned their home as Tenants in Common rather than joint owners.
  • His half of the home went into Trust rather than directly to his widow.

 

Cameron Will

 

Trusts have been instrumental in mitigating tax since the Medieval times. Trusts were initially created for the Nobility and wealthy landowners to avoid paying taxes to the Crown. Nowadays, you don’t have to be a Nobleman, or a wealthy landowner to want to take advantage of the many tax strategies Trusts can provide.

The use of Trusts ensures that assets are protected from attack from the following.

  • Care Fees
  • Divorce / Separation
  • Creditors / Bankruptcy
  • Inheritance Tax
  • Generational Inheritance Tax

We have advised many clients from all walks of life in protecting their homes and other assets, so that their children and grandchildren can maximise their inheritance, and we have now launched a fixed price package to specifically tackle the above problems at an affordable price for all home owners and from all walks of life.

Firstly you will receive a free no obligation home visit from one of our trained consultants which usually takes about 1hr where you can ask any questions and discuss the matter in more detail.

Once you have decided to proceed we will take all the necessary instructions and then commence constructing a Will each, a Flexible Family Trust each with Memorandum of Wishes and also a Deed of Severance. Within approximately 2 weeks your consultant will return with all the documents for signing.

 

PPT

On first death, the deceased’s share of the property is passed into their Flexible Family Trust via the Will. The surviving Spouse or Partner continues to live in the property and is still able to move home if they choose to do so. In the event that the survivor enters care, the survivor only owns half a share of the family home.

The beneficiaries have access to the Trust Funds but we ensure that these assets do not enter their estates and so are protected from attack by the following:

  • Marriage after Death – Placing half of the family home and other assets into a Trust on first death ensures that, should the surviving spouse or partner marry in the future, those assets cannot be taken into the marriage and removes the threat of your children being disinherited.
  • Divorce – Placing your assets into a trust ensures if your children or chosen beneficiaries are subject to a divorce then what you intended them to receive is protected from any divorce settlements.
  • Creditors – Similarly if any of your beneficiaries are subject to Creditor claims or bankruptcy then their inheritance would not be exposed to these claims.
  • Care Costs – The trust ensures that they do not add onto the beneficiaries own estates and so cannot be assessed for their care costs.
  • Further or Generational IHT – Holding the assets in the trust ensures that they do not add to the beneficiaries estates and impact on their own Inheritance Tax.

For more information, please call 0161 771 2056 or simply complete the form below
and one of our consultants will gladly answer any questions you may have.

Finance North
Estate Planning Services
Offices in Cheshire and Staffordshire

www.FinanceNorthEPS.co.uk

 

 

 

The New Tax Band: What If My Property Is In Trust?

The way properties are judged for Inheritance Tax is about to change.

This month (April 2017), the new Residence Nil Rate Band (RNRB) will be introduced. This new band will allow parents to hand more of their estate over to their children without having to pay Inheritance Tax.

Currently, an individual does not pay Inheritance Tax on an estate worth less than £325,000. This increases to £650,000 for couples.

However, the RNRB, something which former Chancellor George Osborne announced, means an end to Inheritance Tax on the family home for most of us. It is essentially an extension to the current tax-free allowance, but applying solely to property. It initially stands at £100,000, but will increase over the next four years until hitting £175,000 in 2020/21.

In order to qualify for the RNRB, the estate must include a qualifying property – basically a property that the deceased lived in at some point during ownership. That property must also pass to a direct descendant, such as a child or grandchild. Finally, the value of the estate cannot exceed £2 million. For every £2 over this limit that your estate is valued, the relief is reduced by £1.

It could save families a huge amount in tax. Things can, however, become complicated if the property is held in Trust.

Why hold a property in Trust?

Trusts can be very useful for people who want to cut their Inheritance Tax bill. By putting certain assets – like a property – into a Trust, they are not viewed as being part of your estate when the time comes to work out what Inheritance Tax your loved ones will have to pay.

While some forms of Trust will benefit from the RNRB, others will not.

The RNRB will only be available with the following Trusts:

  • A Bare Trust for a lineal descendant
  • An Immediate Post Death Interest Trust for a lineal descendant
  • A disabled person’s Trust for a lineal descendant
  • An 18-25 Trust
  • A bereaved minor’s Trust.

Other Trusts will not benefit, for example if the property is left to a basic Discretionary Trust, RNRB will not be available, even if the beneficiaries of the Trust are a lineal descendant.

So how do we maintain the flexibility and protection that a Discretionary Trust offers whilst ensuring that our clients do not miss out on the RNRA?

One less reported aspect of the RNRA and its impact, is how the Trustees can benefit from a strategy in a little known section of the Inheritance Tax Act 1984 (Section 144) which gives the Trustees the power to make their choice later, and decide who is best to inherit within two years of a death. Two years to pick and choose the best person to receive this new RNRA allowance, that person most likely being the youngest member of the family.

But what if the Trustees forget?

Some clients choose their Spouses to be their Trustees, others choose their children and some may pick “John” from down the pub. Are these Trustees likely to know that they have two years to jump into action, probably not?

So we shouldn’t risk using Discretionary Trusts, hoping that the Trustees will miraculously remember to do their job? There is much merit in that argument.

The New Flexible Family Trust

What if we were to offer a Discretionary Trust that means our clients do not have to “speculate” who would be the best person to receive the RNRA at the time they make their Will? A Trust that gives the Trustees a chance to choose the best person at the date of death, BUT also ensures that if the Trustees neglect to do so, the allowance will be received REGARDLESS by default in the terms of the Trust.

We therefore present the
NEW FLEXIBLE FAMILY TRUST!

Our new Trust ticks all of the boxes. The flexibility within two years of death to “pick the right person” but also with the security in knowing that if the Trustees are “sitting on their hands”, the trust defaults for them, ensuring that the relief is never lost.

Jon O’Brien from Finance North Estate Planning Services says: “Working out exactly who should get what after you pass away takes a lot of thought and planning. Getting a comprehensive Will in place is crucial. Please come and speak to us today on 0161 771 2056 to receive expert advice.”