Wills & Trusts

[ChrisKH]

There seems to be a fair amount of divergence on whom you should see about this. As a Chartered Accountant with some experience in Trusts, Wills and Probate it is my advice that you consult a solicitor with experience in this field for the legal/will aspect of your query.

 

[mr_cellophane]

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.

That was changed about 3 years ago. Now the IHT threshold is £325,000 for a single person and this threshold is "transferable" to the surviving spouse. So when the second one dies they can leave £650,000 (providing they haven't used any on the first death) before paying 40% tax. One (or only) example of Labour cutting taxes.

 

[Over The Hill]

That was changed about 3 years ago. Now the IHT threshold is £325,000 for a single person and this threshold is "transferable" to the surviving spouse. So when the second one dies they can leave £650,000 (providing they haven't used any on the first death) before paying 40% tax. One (or only) example of Labour cutting taxes.

Just looked it up and you are quite right- sorry I am a bit behind on this.

I think however the transferable thesthold is only for a spouse so unmarried couples may still need a trust. There may also be advantages if your combined estate is worth over £650k (buy to let owners beware). I am piss poor but may strangely leave assts presently worth £750k when all the mortgages are paid off that is!