Disabled person inheritance tax

kier

I read somewhere recently that if a parent was leaving their money to a disabled daughter or son that the money is exempt from inheritance tax. Does anyone know if this is correct or have any links to information regarding it. Thanks in advance.

Kier

Flugelhorn

there is something about it here: http://www.hmrc.gov.uk/trusts/iht/which-trusts-pay.htm#7

http://www.hmrc.gov.uk/trusts/types/vulnerable.htm

System

The way I read things it needs to be gifts into a disabled person's trust fund. I am not sure that bequests come under the umbrella of gifts in this context

kier

Thanks for your replys guys. I don't quite get this:
Trusts for disabled beneficiaries and Inheritance Tax
A trust set up for someone with a mental or physical disability is not a relevant property trust. This means there is no ten yearly charge.
Exit charges don't apply if the asset stays in the trust and remains the 'interest' of the beneficiary.
You don't have to pay Inheritance Tax on the transfer of assets into a trust for a disabled person as long as the person making the transfer survives for seven years after making the transfer. These sorts of transfers are called 'potentially exempt' transfers.

If the person still has to survive seven years there is no exemption then. Or am I missing something.

grey_gym_sock

yes, there appears to be no exemption from inheritance tax on the death of the donor. however, some kinds of trusts also have to pay inheritance tax every 10 years after the trust is set up (the "ten yearly charge"), and it's saying that trusts for disabled beneficiaries are exempt from that.

i'm not an expert, and trusts can get complicated, but i think that's the general idea.

nearlyrich

If you are talking about an estate that is large enough to attract inheritance tax and potentially avoiding paying the tax by having a trust set up I would say it was worth paying for some professional advice and getting it done properly.

xylophone

http://www.mencap.org.uk/what-we-do/our-services/wills-and-trusts

might be worth a read.

Trusts and their taxation rules are complex - take expert advice.

jackyann

I would definitely get expert advice. There is certain to be a charity / special interest group relating to that disability. They may have their own experts, or will certainly point you in the right direction.
I have worked with people with disabilities, and have come across many instances where money left with the best of intentions, has caused problems. For instance: one of my clients was given a house by her grandparents, with the intention that she would always have a roof over her head. As years went by, she had difficulty dealing with repairs and the other problems that come with home ownership. There were other complications around selling etc..etc...
So I would talk to people who understand the implications for the type of disability the person in question has, and get legal / financial advice from people who understand that.

kier

thank you all, it does appear there is little opportunity to avoid this tax but will be taking some legal advice soon.