Nursing Home fees? Inheritance Tax? Capital Gains Tax?….

If your estate was a cake, it could be argued that the Chancellor is ever present with a cake slice ready to dig deep into the said cake to take out a huge slice for the Treasury.

Understandably and increasingly, clients are looking to manage the potential tax liabilities of their estate by turning to an ancient but in many ways not such a reliable remedy as it once was – the Trust!  Matters are not helped in this regard by internet touting of a variety of newly named trusts which in essence are nothing more than a polished marketing strategy for something which has been with us for years. 

So, what is a trust?

If you’re not familiar with the concept, then in its simplest terms, a trust is similar to a limited company in that it is a legal entity in its own right. The common notion is that if you transfer assets away from your ownership into a trust, then such assets will not fall foul of inheritance tax subject to all of the various rules and timings. However, in the dash to save the cash, tax breaks can be overlooked. For example, if the family home is transferred into a trust, then its no longer your family home to leave. 

If the home is held jointly and would have been passed to the children as part of your Will, have you considered what happens to the nil rate residence band of £175,000 (per owning parent)? If the house has gone into a trust, the simple answer is that the trust doesn’t have children so there’s no nil rate residence band to benefit from. This is just one consideration, and there are many more before invoking a trust mechanism.

 In recent years there has been promotion of the “trust product” on the internet, with arguably a one size fits all approach on the subject. Categorically this is not the case. Before opting for a trust option the very best advice must be sought with particular emphasis on where the savings on tax can be made and where equally tax advantages can be lost.