Trusts

Question 1

what is an Interest in Possession trust?

Answer 1

An IIP is where we have a life tenant who is entitled to the income from or the use of the trust assets until either their death or the end of their interest in possession.

The person who is entitled to the capital asset itself when the life interest ends is referred to as the remainderman.

Question 1

what is a Discretionary trust?

Answer 1

A discretionary trust by contrast is a more flexible arrangement whereby the distribution of any income or capital from the assets in the trust is completely at the discretion of the trustees.

Question 2

what are the IHT impacts of a trust?

Answer 2

when first put into trust:
- CLT charge 20 or 25%
- trust set up on death will be subject to 40% iht.

while in the trust:
- 6% iht charge every 10 years

when distribute out of the trust
- 6% IHT charge

Question 3

what are the CGT impacts of a trust?

Answer 3

• Gift into trust= chargeable disposal at MV
• gift holdover relief can be claimed as there will be an IHT charge
• trustee acquired the asset at base cost (MV-GR)