Chris Thorpe looks at how trusts and inheritance tax interact and how useful they can potentially be.
Trusts can be a very useful planning tool for inheritance tax (IHT) purposes, as well as family and business succession planning.
Tax is only one factor, as preservation of the family silver is another potential advantage of trusts; but they are not necessarily always suitable.
What are trusts?
A trust exists broadly when the legal and beneficial ownership of an asset lies with different people – one person (or up to four people) can be the legal owner (‘trustee’) who holds the asset for the ‘beneficiaries’, with the ‘settlor’ having placed the asset into trust. However, the settlor (or their spouse or minor unmarried children) should not benefit, ideally.
In its purest form, a bare or
