Inheritance Tax: Save £100,000s with simple advanced planning Article Discussion

RobS77

sloughflint wrote: »

Glad you clarified.
You wrote:

I'm sure you'll be much more precise when drafting your wills.;)

I have never once drafted a pecuniary legacy of the NRB- I think it much easier to incorporate a discretionary trust of the same.

cecilia_clementine

John_Pierpoint wrote: »

Am I right in thinking that the beneficiary, if not a higher rate tax payer, will be able to reclaim the "excessive" tax paid?

RobS77 wrote: »

If the income is appointed out to a lower rate tax payer, then it can be taxed at source, and ordinarily wouldn't have to be reclaimed. I would normally do a deed appointing the income to the Settlement in this regard. It would be declared on the income tax return for the settlement.

You would normally do a letter notifying the Revenue of the trust (would have to fill in form 41G) but as the shelf settlement is non-income producing, they wouldn't issue returns ordinarily until assets were transferred to it, as long as you explained it would be non income producing initially.

This has caught my eye as I am thinking about setting up a trust for my grandchildren.

RobS77 - You seem like a knowlegeable chap, I would like to avoid paying 50% income tax and all the hassle of the beneficiaries having to reclaim it and wonder if what you say about trust income being able to be taxed at source applies to all trusts?

Also I've heard a lot about STEP - are they all solicitors then as I think I need to locate one?

RobS77

sloughflint wrote: »

LOL. That made me smile.

Welcome to MSE. It's nice to have a new poster amongst our midst sharing their knowledge.

Don't go taking yourself too seriously though now

Fair point! But you can leave a gift constituting a trust rather than an outright gift: as you appreciate posting at work I don't have time to check everything 5 times........

Thanks for the welcome- no chance of that honest! Although I am the first to admit I can get rather immersed in the techie stuff- I am way too much of a geek for my own good!

RobS77

cecilia_clementine wrote: »

This has caught my eye as I am thinking about setting up a trust for my grandchildren.

RobS77 - You seem like a knowlegeable chap, I would like to avoid paying 50% income tax and all the hassle of the beneficiaries having to reclaim it and wonder if what you say about trust income being able to be taxed at source applies to all trusts?

Also I've heard a lot about STEP - are they all solicitors then as I think I need to locate one?

Thanks. I do a fair amount of trust work: certainly when I have done deeds of appointment of income, it has often been directed at beneficiaries who are lower rate tax payers, and they haven't had to complete a separate tax return. As for STEP, I think it is possible for accountants to do it, although couldn't swear to it: most will be solicitors though. Law nowadays, inevitably, is all to do with specialisation: the older generation still on occasion tend to dabble a bit, which can create problems which have to be sorted out later on!

cecilia_clementine

Sorry Rob, I am still none the wiser. Your earlier post seemed to suggest that beneficiaries of trusts could be taxed at source rather than having to reclaim the 'overpaid' tax - I wonder if that applies to all trusts?

RobS77 wrote: »

If the income is appointed out to a lower rate tax payer, then it can be taxed at source, and ordinarily wouldn't have to be reclaimed.

RobS77

Sorry Cecilia, yes it would normally be taxed at the lower rate and paid straight to the beneficiary. That is how we are getting round the higher tax rate at the mo- the other option is to invest the trust fund in some sort of bond which won't pay income tax but will be taxed at the capital gains tax rate- an IFA should be able to sort that out for you.

cecilia_clementine

RobS77 wrote: »

Sorry Cecilia, yes it would normally be taxed at the lower rate and paid straight to the beneficiary. That is how we are getting round the higher tax rate at the mo- the other option is to invest the trust fund in some sort of bond which won't pay income tax but will be taxed at the capital gains tax rate- an IFA should be able to sort that out for you.

Thanks for the reply Rob. An accountant friend reckons that you're wrong and that you can only do that with interest in possession trusts. I want to set up a discretionary trust and he reckons that the beneficiaries have no option but to claim the tax back later.

Are you quite sure?

RobS77

Yup- thats what we do with our clients. You do a deed appointing the income to the beneficiary, or beneficiaries, in question- our accounts guys have never had any problems.

By granting a revocable life interest to income in whatever terms you want, you effectively grant a right to income to the lower rate tax payer for as long as the interest lasts for: most accountants don't do alot of trust work. Who does he work for? You need to get advised by someone who specialises in the field.

sakt77

First time posting so after some advice.
My Fiancees dad dieed 27trh of December aged 71 and it was out of the blue.
He was a self employed Accountant who worked from home up till the day he died.
He re married and had a son. So there his wife my Fiancee, her sister and their half brother left behind.
Now they've just found out he left no will (Great!) so he Intestacy and now they ar going to be screwed over for Inheritence tax- His property is probably worth around £350'000 and then there's the rest of his money and business etc so easily over the threshold.
Are they stuck or is there anything they can do?
I gather they only pay 40% on anything over the limit?

I cannot beleve her father never made a will- a bloody accountant aswell:eek:

Any advice appreciated

John_Pierpoint

Probably best to start your own thread, with ALL the information needed to attract sensible replies.
(Find appropriate sub forum and click "forum tools" on the right side of the heading for the list of threads in the sub forum)
This posting has some things in common with your situation.
http://forums.moneysavingexpert.com/showthread.html?t=2189645

For what it is worth my father was a Chartered Accountant; he died intestate; though without the complication of having established two families. However because he died intestate, in the long term the workings of the intestacy laws, (over the will my mother wished he had written) saved a small fortune in IHT.

For the benefit of those reading this, having children offers hostages to fortune - definitely time to make a will.