Most new trusts are now subject to the Inheritance Tax (IHT) “relevant property regime”.
This involves two types of IHT charges:
- a 10 yearly (periodic) charge
- a distribution (exit) charge
If the relevant value does not exceed the IHT nil rate band (see tax information) there is no IHT to pay.
If the relevant value exceeds the IHT nil rate band, IHT is payable (see tax information for rates).
Life interest trusts that existed on 22 March 2006 and immediate post death interest (IPDI) trusts (see Immediate post death interest trusts) are not subject to the relevant property regime. They usually suffer IHT at death rates (see tax information) when the life interest comes to an end.
Bare trust funds are normally treated as assets of the beneficiary for IHT purposes. This means they are treated as if the trust did not exist.
At Hart Brown our specialist lawyers and independent financial advisers can help you with all aspects of IHT planning so that you do not pay more tax than absolutely necessary. To see how our advice can work in practice read our 'Top Tips' on reducing inheritance tax