IHT planning - creating and administering a trust containing equities

In message , John writes

Finance Companies dont generally do trust, they lend money for cars and stuff.

Most Life Companies provide trust wrappers of various sorts and their quality varies enormously but most of them only provide trusts that work for a Life Bond.

What type of trust were you wishing to create? If it has some special requirements then use a specialist solicitor, most High Street solicitors will claim they can do this but they cant. Also, be sure of the tax consequences of the trust you are creating, you could end up paying IHT on the way in and every ten years.

Sorry John I was unclear - I meant stockbrokers or companies that sell UTs/OEICs.

Interest in posession - life interest.

Parents are life tenants taking dividends and trustees (if poss.) - although they may not require the income - can this be changed each year ?

Offspring are remaindermen upon death of 2nd parent (if poss.)

I don't consider the requirements special. I'm not interested in pushing the legal boundaries - just taking advantage of existing tried and tested techniques as opposed to doing nothing (other than a will) and incurring IHT. I want to reduce the estate but don't want to entirely remove my right to income. If possible I'd like control of the investment decisions.

How do I recognise a specialist solicitor ? I'm aware of specialisms but are there certain qualifications I need to look for the areas of concern - inheritance tax avoiding trusts, wills and finance. From what I've seen solicitors can specialise by using the Law Societies professional continuing development programme, which seems rather vague.

I've done some Googling and located -

Society of Trust and Estate Practitioners (STEP)

That's just discretionary trusts presumably ?

I appreciate there a lots of options, but the requirement are relatively simple

- make an equity/gilt portfolio either by direct holding or via UTs/OEICs/ITs, wrapped in a trust to avoid IHT, and I'm just trying to get a basic understanding of whether this is possible prior to seeing a solicitor.

Thanks

John

Watch out you may be about to become a test case:

6381&dx6&hx4&fx5 The law in the IHT area is changing fast, I have no idea if the above is relevant to you, but I'd be very cautious about IHT planning until the new bits have settled down.

Thanks Peter - If I'm reading this correctly it seems to me that the IR wishes to simplify and bring all money/assets moving out of a persons ownership (whether direct to recipient or to a trust) within the existing 7 year PET rules ?

This will make what I'm considering pointless ?

I appreciate it's not yet statute, but could you confirm my general understanding of the proposals ?

Thanks

John

That's my understanding too, however I'm not a professional in these matters (I am however interested given my parents current will & trust setup and am reasonably good with VAT) I'm unsure if the PET stuff counts under these circumstances as the examples on that page are going back to the last IHT changes in 1986. As always get a professional in, possibly using this lot as a filter to see if they are upto date.

In message , John writes

Please excuse the huge snip of the rest of your post.

An interest in possession means the value of that interest is included in the beneficiaries estate and you will achieve nothing.

ALSO, the IR have stated their intention to review the taxation of trusts and some small changes have taken place.

If I have misunderstood then please let me know.

My sentiments exactly. Do let us know if you make any headway. I have been unable to penetrate the magic circle but you may be more determined than me :-)

OK - It seems to me that there is no widely accepted way of avoiding PET or the

20% & 10 year taxes. I incorrectly assumed that this was what trusts did. Trusts appear to control who, when and under what circumstances beneficiaries receive payments rather than avoiding existing taxes.

I've been reviewing this and may well wait until it's finalised.

You've misunderstood nothing - I've misunderstood just about everything :-)

Thanks for everyones help.

John

Well there are some ways, such as a discounted gift trust which creates a gift without reservation of interest but with reversion of capital, but it has limited use and benefit and you MUST use an offshore life bond to make it work, but you can put UK Unit Trusts in the bond. The Interest in Possession trust only gives the settlor the ability to control the beneficiary, not the tax

I think your best bet is to speak to an IFA who has passed an exam known as G10, who works on a fee basis and who offers IHT solutions in conjunction with a solicitor who specialises in trust work and tell them your scenario and ask them for their solution rather than determining the solution yourself and then trying to get somebody to do it. In other words, dont try and be the doctor who is looking for somebody to dispense a prescription you have written yourself, get somebody else to write the prescription. (No offence on your own abilities intended here)

The trouble is, how on earth do you find an IFA (Dr) who can write the prescription? 90% would have no idea!

As with any other professional adviser, the client needs to know enough about the subject to spot those advisers who don't know the subject :)

Excellent - that was what I was looking for, or even a solicitor with G10 (ie to get to AFPC G10 they must also have good financial knowledge) !

Thanks for your help - much appreciated !

John