Trust solutions

Managing wealth

We can advise you on a range of different trust solutions, each designed with a particular purpose in mind.

Some types of trust are treated differently for Inheritance Tax purposes.

Bare trusts

These are where the assets in a trust are held in the name of a trustee but go directly to the beneficiary, who has a right to both the assets and income of the trust.

Transfers into a bare trust may also be exempt from Inheritance Tax, as long as the person making the transfer survives for seven years after making the transfer.

Interest in possession trusts

These are trusts where the beneficiary is entitled to trust income as it’s produced – this is called their ‘interest in possession’.

On assets transferred into this type of trust before 22 March 2006, there’s no Inheritance Tax to pay.

On assets transferred on or after 22 March 2006, the 10-yearly Inheritance Tax charge may be due.

During the life of the trust, there’s no Inheritance Tax to pay as long as the asset stays in the trust and remains the ‘interest’ of the beneficiary.

Between 22 March 2006 and 5 October 2008:

• beneficiaries of an interest in possession trust could pass on their interest in possession to other beneficiaries, like their children
• this was called making a ‘transitional serial interest’
• there’s no Inheritance Tax to pay in this situation

From 5 October 2008:

• beneficiaries of an interest in possession trust can’t pass their interest on as a transitional serial interest
• if an interest is transferred after this date, there may be a charge of 20% and a 10-yearly Inheritance Tax charge will be payable unless it’s a disabled trust

If you inherit an interest in possession trust from someone who has died, there’s no Inheritance Tax at the 10-year anniversary. Instead, 40% tax will be due when you die.

(CAVEAT)

The treatment of trusts for tax purposes is the same throughout the United Kingdom. However, Scottish law on trusts and the terms used in relation to trusts in Scotland are different from the laws of England and Wales and Northern Ireland.

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Investment advice will be provided by our sister company ad+ Financial.

The value of your investments can go down as well as up and you may get back less than you invested.

The Financial Conduct Authority does not regulate Tax Advice, Trusts, Cash ISAs and National Savings and Investments.

Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor.

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