Tax planning and anti-avoidance Flashcards
How may clients mitigate the risk of a PET becoming chargeable if they die within 7 years?
taking out fixed term life assurance to cover cost of IHT on the PET
Why should assets which will increase in value be favoured when giving PETs?
They are charged on their value at transfer not DOD
What is the parental settlement rule?
transfer to unmarried minor child treated as parent’s property for income tax
Who are exempt beneficiaries in wills?
spouses/civil partners
Charities
What consideration should be made when making a specific gift of qualifying business/agricultural assets?
Specific gifts to exempt beneficaries will waste the APR/BPR
How may APR/BPR be claimed on a specific gift to an exempt beneficiary?
Made into a discretionary trust
What consideration should be made when making a gift of residue of qualifying business/agricultural assets?
APR/BPR dont attach but are apportioned, may be wasted if apportioned to exempt beneficiary
How can bunching be avoided?
- Can make gifts to children or others
- Leave into discretionary trust so not included in estate when survivor dies
Is a trust under a will a separate legal entity?
No
When does a will trust come into existence?
DOD
What is a discretionary will trust?
To group of beneficiaries
No fixed rights to assets
Trustees have full discretion
What is a life interest trust?
benefit of life tenant and remainderman
Is there any immediate tax saving for a testator making a discretionary will trust?
No
What is the tax saving for discretionary will trusts?
Beneficiaries not taxed on assets when they die
What is the effect of a 2 year trust?
distributions made within 2 years treated as under will