As some of you may be aware the Finance Act 2006 made wholesale changes to the wealth planning landscape by introducing the 10 year charge or 6% and exit charges to pretty much all lifetime trusts. Add to this the immediate 20% inheritance tax charge to assets added into trust above the nil rate threshold and you can begin to understand why many think the use of trusts has had its day.
However, nothing could be further from the truth, both for business owners and people holding significant private wealth. Various entities have been put forward as the alternative: family limited partnerships (FLPs), family general partnerships and FICs. There are, however, regulatory downsides to using partnerships and, until recently, there were taxation downsides to using FICs (see my earlier blog on these). However, none of these have fully replicated the usefulness of trusts.
The biggest advantage of a trust over all of its would-be successors is that it allows the donor to retain full control over the assets being gifted, be that shares in the family business as we have discussed here before, or holding a property for another persons benefit. What a trust does is divide the legal and beneficial ownership. Now, whilst the English family law courts have driven a truck through the concept of equity and trusts in recent years, they are still terribly useful in helping to manage a family's finances and exposure to inheritance tax. They are however now only part of the solution, not all of it.
If you'd like to discuss the use of trusts are part of your overall tax and wealth planning please get in touch with us for a free, no obligation consultation.
Disclaimer - The above blog does not constitute advice and not should be taken as such. The author accepts no responsibility for losses arising from taking action based on the contents of this blog alone.
No comments:
Post a Comment