IHT Mitigation

Question 1

Ways to mitigate iht

Answer 1

Use exemptions
Outright gifts
Trusts
Insurance
Invest in business relief assets - outside estate for iht after 2 years

Question 2

Use of trusts - discretionary trust

Answer 2

Give away access to capital and income

Class of beneficiaries are selected - ie children / grandchildren

Trustee are then appointed

Who will control who and when and the underlying investment of assets

Classed as CLT for iht purposes

Amount unlikely to be above nrb so unlikely to be an initial iht charge

Annual exemptions can be used to reduce CLT by 12000

As it is a CLT will not form part of any beneficiaries estate for iht purposes

If using existing unit trust then can claim holdover relief so base rate passed to trustees

Disadvantages

If death occurs within 7 years this will use NRB as will fall back into estate

If income exceed £500 then ALL will be taxed at ART 45% / 39.35

Income will be distributed as trust income with 45% tax credit so beneficiary have to reclaim tax via self assessment

Potential exit and ongoing charges

Trust only have half CGT annual exemption for any gains, rest taxed at hrt either 20 or 24%