Trusts and inheritance tax

Trusts and inheritance tax play a pivotal role in effective financial and tax planning, especially in reducing the tax due on your estate. Trusts provide a versatile framework for holding shares in private companies, making them an indispensable tool in family financial strategies.

But their usefulness doesn’t end there. Trusts serve various purposes, including:

  1. Providing for education, maintenance and more

Trusts offer a dedicated means to fund education, maintenance or other essential financial needs, ensuring that your loved ones are well-cared for.

  1. Controlling access to assets

In certain cases, you may wish to control the timing and extent of beneficiaries’ access to assets. You can structure your trust to achieve this objective.

  1. Caring for incapacitated individuals

Trusts can be instrumental in providing financial support for individuals who may be incapacitated or unable to manage their own finances.

  1. Gifting to charity

If you’re inclined towards philanthropy, trusts offer a vehicle for charitable giving that aligns with your values and causes.

The main types of trusts

Diving deeper into the world of trusts and inheritance tax, there are many types, each with distinct tax treatment and adaptable for various purposes.

Our team are ready to provide valuable insights and guidance in setting up the right trust for your specific needs.

  1. Bare trusts: These trusts provide the beneficiary with an immediate and absolute entitlement to the trust property.
  2. Interest in possession trusts: In these trusts, the beneficiary is entitled to the trust’s income as it arises.
  3. Discretionary trusts: Structuring your trust in this way offers flexibility in distributing income and assets among beneficiaries, giving the trustees discretion in the allocation of trust assets.
  4. Accumulation trusts: This is where the trustees can accumulate income within the trust and add it to the trust’s capital.
  5. Mixed trusts: These are a combination of more than one type of trust. The different parts of the trust are treated according to the tax rules that apply to each part.
  6. Settlor-interested trusts: These are where the settlor or their spouse or civil partner benefits from the trust.

The tax implications of trusts such as exit charges or inheritance tax charges, depend on various factors including the type of trust, the assets held within it and the duration of the trust.

Trustees, beneficiaries and settlors must be aware of these considerations, and we can advise thereon.

Why use an accountant for trusts and inheritance tax

Navigating the intricate landscape of trusts and inheritance tax can be a complex and daunting task. For individuals and families looking to safeguard their wealth and ensure a smooth transition of assets to the next generation, seeking the expertise of a qualified accountant is a prudent choice.

Here’s why using an accountant for trusts and inheritance tax is not just a wise decision but an essential one.

  1. In-depth knowledge of tax regulations

Accountants are well-versed in the rules governing trusts and inheritance tax. The UK tax system is known for its complexities, and accountants have the expertise to help you navigate through them effectively.

  1. Tailored trust strategies

An experienced accountant can assess your financial situation and goals to recommend the most suitable trust structure. We’ll consider factors like the type of assets in the trust and your specific objectives to create a customised plan.

  1. Minimising inheritance tax liability

One of the primary goals of using an accountant for trusts is to reduce your inheritance tax liability. Accountants understand the intricacies of inheritance tax, including the nil rate band and available reliefs, and can create strategies to preserve your wealth for future generations.

  1. Compliance and reporting

We can assist with administration, accounting and taxation reporting of trusts including completion of tax returns and inheritance tax returns.

We will advise on the ten year anniversary reporting and exit charges in relation to the capital distributions to beneficiaries.

  1. Peace of mind

Entrusting your trusts and inheritance tax planning to a qualified accountant can give you valuable peace of mind. You can focus on your family and financial wellbeing, knowing that your finances are in the capable hands of experts.

Speak to an expert today

If you’re looking to set up a trust or re-evaluate an existing one to reduce your inheritance tax liability, our team is ready to assist you.

Contact Mark Mitchell on 01383 628800 or email to arrange a free initial consultation. Trusts and inheritance tax planning has never been more critical, and we’re here to ensure your family is as financially secure as possible.

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