Wills & Trusts

Realised that I have a few life insurance polices which would add up to a reasonable amount. Would like to ensure that capital gains taxdeath duties are minimised.

I believe trusts are a good way to do this but I don't really understand how they work. can you make your wifehusband a trusteebeneficiary so that heshe doesn't get lumbered with unnecessary taxes upon your death? and what can you put in a trust assetwise etc?

would appreciate some simple advice from anyone legals or in-the-know CC'ers about these things!
 

swee'pea99

Legendary Member
I'm no expert, but I believe Trusts can hold all sorts of assets, and any such assets become progressively less subject to Inheritance Tax over a period of five years, after which they're IH-proof. (I think they 'shed' IH-liability at a rate of 20% a year.) So put stuff in a trust, then don't die for at least five years and away you go!
 

Crankarm

Guru
Location
Nr Cambridge
Errr ......... go and visit a solicitor/accountant that specialises in wills and estate planning, private client work. If you potentially have a sizeable estate why seek advice on a cycling forum that may be wrong or out of date and which you or your beneficaries have no come back if things go tits up ???!!!! ;).
 

ASC1951

Guru
Location
Yorkshire
swee said:
Hmm. It's seven years, not five, but Gordon Brown has had his sticky fingers all over trusts, so trust income is now taxed at IIRC 30% and gifts into a trust which approach the IHT threshold are 'pre-taxed' at 20%.

Solicitors are going to charge you £300+ for setting up a small trust (well, I would have) and if you are just bothered about these life policies you probably don't need one. All you need to do is to ask the life company for their leaflet and forms for "writing the policy in trust". They don't usually charge for doing that.

Once you have put property into a trust, it is no longer yours. You can't get it out of the trust again if you change your mind (unless all the beneficiaries are adults and agree). That shouldn't matter with your life policies, because by definition you weren't going to get the money anyway. Another point to bear in mind is that writing policies in trust will take precedence over anything you say in your Will about them.

And finally, if your estate is going to have IHT implications (a joint estate of £650,000 if you are married), you are barking mad if are going to rely on what you pick up on this or any other forum. Go and buy some legal advice FFS.
 
Go to a solicitor who knows about probate law.

you can write your Will and specify certain gifts (e.g. the house) are exempt of IHT. Although your spouse will get this anyway, but you could give it to your children doing this. Then the IHT will come from the residue of the estate.

You could give pecuniary (set amount) gifts to relatives, friends, etc... then specify that the residue up to the IHT threshold go to the other half and anything above that to charity.

A specialist solicitor can help - but make sure they know probate law. Check out the Law Society site and search for a probate sol near you.
 
For the life policies, the insurance company they're with would be able to provide trust forms, which are very simple and easy to complete. There's no problem with making your spouse/partner as Trustee and for them to also be a beneficiary.

Upon your death the benefit can then be paid directly to the nominated beneficiaries free from Inheritance tax and without waiting for Grant of Probate.

If you have other assets, such as bonds, investments etc, then those can be placed into trust, but for that scenario, as mentioned above, it would be best to get legal advice from a solicitor.
 

snorri

Legendary Member
I would be wary of going to a solicitor for financial advice, better to go to an organisation who can guide you on IHT limitation and advise on investments to best suit your needs. Solicitors tend to be more limited in the range of investments they offer.

Location of an IFA near you....
http://www.searchifa.co.uk/

Or visit a company of Investment Managers near you.
http://www.apcims.co.uk/findafirm/find_a_firm.php.....
 

RecordAceFromNew

Swinging Member
Location
West London
If you want to be an intelligent buyer of services provided by solicitors, accountants, banks/insurers or IFAs etc. on the subject, you will have to read up quite a bit. I would advice one does because the subject is complex and many "experts" are probably not as expert as they may lead you to believe, it is VERY hard to provide faultless advice, and a mistake can be very costly.

A key authority on Trust law in this country is James Kessler QC. This is by him (in 9th edition) and probably the most comprehensive book for your purpose. Although it costs over £130, if significant assets over the IHT threshold is in play then it is probably just a drop in the ocean of the tax that can be saved legitimately.

You can spare yourself the trouble if your assets are below the IHT threshold, or if the relevant assets are life policies written in trust already.
 

Mille

New Member
Location
Stone
Also, and linked i think, Independant Financial Advisors are not necessarily that.

Until the new rules they are now talking about come in, you can still be misled into thinking an IFA is independant when really they are 'tied' to a particular company.
 

RecordAceFromNew

Swinging Member
Location
West London
Mille said:
Independant Financial Advisors are not necessarily that.
Indeed. If independent, for complex matters advisors (including lawyers and accountants) generally sell advice by the minute, and many are under pressure to maximise time spent on reimbursable work. Separately, once you have started with one, it can be costly for you to switch.
 
Location
Essex
trustysteed said:
Realised that I have a few life insurance polices which would add up to a reasonable amount. Would like to ensure that capital gains taxdeath duties are minimised.

I believe trusts are a good way to do this but I don't really understand how they work. can you make your wifehusband a trusteebeneficiary so that heshe doesn't get lumbered with unnecessary taxes upon your death? and what can you put in a trust assetwise etc?

would appreciate some simple advice from anyone legals or in-the-know CC'ers about these things!
There has never been any IHT payable on monies left between spouses. You can assign life policies to anyone. That means that without assignments on your death any life policies pay to your wife. If she dies soon after IHT could be payable. If you assign the policy to your children, on your death they get the money and it doesn't form part of your estate.
 
When you die you have a level at which tax is paid at a fairly high level. You would be wise to avoid this. A trust is a device to do this.
How?
You and partner each have a share in your joint worth. When one of you dies it makes sense that only HALF of the joint worth passes to the survivor.
Now on the death of the second partner the FULL value of joint estate is passed on to family. This is often over the tax rate and if so thousands of pounds is paid over in tax.

So now what if on the first partners death the value of their half is NOT passed to the survivor? But held in another form?
First partner dies HALF value left
Second partner dies -this time also HALF left. Bingo! it stays under tax threshold.

To do this you set up a Trust. This is a sort of entity in itself a bit like a company but with trustees running it not directors.
Survivor stays in the house or has access to money and is often running the trust.
Benefit of arrangement is not to the survivor but to those the estate is then left to. It is about the most cost effective bit of paper you could draw up.
 

cyberknight

As long as I breathe, I attack.
trustysteed said:
Realised that I have a few life insurance polices which would add up to a reasonable amount. Would like to ensure that capital gains taxdeath duties are minimised.

I believe trusts are a good way to do this but I don't really understand how they work. can you make your wifehusband a trusteebeneficiary so that heshe doesn't get lumbered with unnecessary taxes upon your death? and what can you put in a trust assetwise etc?

would appreciate some simple advice from anyone legals or in-the-know CC'ers about these things!
Are you in a union? we get free will service from ours:biggrin:
 
Top Bottom