Inheritance planning / APTs (asset protection trusts)

ey143

I've always been weary about the so called dodgy stamp duty avoidance scheme and was never convinced to go ahead with it despite these so called "advisers" claiming to save me 30k on my house. Glad I didnt given all the news about stamp duty avoidance schemes.

I now need to do a will after we had our first child 2 years ago and bought a house a year ago. However, I am now being pushed to consider IHT planning which involves the setting up of these Trusts so that my house is owned by the Trust and then my future children will not be subject to assets held in these Asset Protection Trusts (APTs).

Can someone with a qualified understanding of these structures please comment on the use of these especially in light of again, more recent news about the use of such tax avoidance schemes being closed down or frowned up by councils for those trying to avoid assessment for care homes etc.

I'm not even 40 yet but my wife's assets and mine, when taken into account life assurance, house etc, will be fairly sizable but not I consider ridiculously wealthy.

Thanks.

macca1974

Last time I saw an Asset Protection Trust, the logic behind it was to make sure that your property goes to who you want it to go to. So you split the property between you and partner (tennants in common), then each place your half into the trust. You can then make sure that in the event of death, your half of the property goes to your kids (usually with the partner as a life interest) and means that if the partner re-marries, the new partner can't get their hands on your property...The way the trusts were structured also meant that the assets in the trust weren't an asset when looking at care costs (which was of course a happy coincidence and not a reason for the planning as that would be deprivation of assets). It was a few years back I looked at these so might well have changed.

One of the issues with them was that if your part of the property was worth more than the IHT Nil Rate Band (which I'd have thought yours is if you paid £30K stamp duty on it) then you have to pay tax to put it into the trust and also pay tax every 10 years and on exit.

The whole purpose of them when I saw them was to dodge Long Term Care bills.

For somebody who is just 40, it would seems a bit odd to use one of these trusts. I would probably look at having your will looked at properly, but make sure that you have things like Life Assurance paid into trust rather than to your estate as this can reduce your liability a lot.

Mrs_pbradley936

I think you are far too young to consider this yet. I am in my mid 60s and still do not want to lose control of my assets. You could get divorced, be widowed, have children with someone else or all manner of things in the next 25 to 30 years.


Plus your children could be drug takers, be gamblers or marry unwisely and all the money, time and effort you have put into securing their future has been a complete waste.

ey143

Hi

Thank you for your feedback. I am usually very clued up on investments etc and advise other people in an informal capacity given that I work in finance but I'm not au fait with tax planning rules and dont want anthing dodgy which will affect my reputation or indeed incur headaches with the tax man.

The problem is, if something happened to me today, then my employer's death in service benefit and my life assurance policy would be sufficient together with my wife's savings be liable to a significant inheritance tax bill for my daughter and future children.

I might still be young(ish) but we can never predict what might happen to us. So I want to a) minimise my beneficiaries tax bill (my wife is financially clueless despite being a medical practitioner) and b) ensure that the assets are protected in the event of the children ever separating from their partners.

What are the downsides of putting assets into a Trust like this versuses the upsides because I am only told the upside by these tax planners who want to charge some some few thousands of pounds. Do you really lose control of the assets whilst you're alive? I did ask them what if I wanted to setup a business for my wife and use the equity, and they said it was possible.

Also does it really cost a few thousand pounds? The advisers didn't mention anything about paying tax on it every 10 years or tax to put it into the Trust.

Daniel54

ey143 wrote: »

Hi

The problem is, if something happened to me today, then my employer's death in service benefit and my life assurance policy would be sufficient together with my wife's savings be liable to a significant inheritance tax bill for my daughter and future children. .

Proceeds from life insurance do not form part of your estate for IHT purposes.Nor do your Death in Service benefits,which will be distributed by the trustees ,almost always in accordance with the form you have completed setting out your wishes,which I assume is in favour of your wife.

Secondly,there is no inheritance tax to be paid between spouses,so the estate would only be subject to IHT on her death,not yours.

Seems to me you are being sold something you don't need or understand -walk away.

If you need proper estate planning,consult a suitably qualified IFA and/or a STEP solicitor.

http://www.step.org/

https://www.unbiased.co.uk/

Mrs_pbradley936

ey143 wrote: »

Hi

Thank you for your feedback. I am usually very clued up on investments etc and advise other people in an informal capacity given that I work in finance but I'm not au fait with tax planning rules and dont want anthing dodgy which will affect my reputation or indeed incur headaches with the tax man.

The problem is, if something happened to me today, then my employer's death in service benefit and my life assurance policy would be sufficient together with my wife's savings be liable to a significant inheritance tax bill for my daughter and future children.

I might still be young(ish) but we can never predict what might happen to us. So I want to a) minimise my beneficiaries tax bill (my wife is financially clueless despite being a medical practitioner) and b) ensure that the assets are protected in the event of the children ever separating from their partners.

What are the downsides of putting assets into a Trust like this versuses the upsides because I am only told the upside by these tax planners who want to charge some some few thousands of pounds. Do you really lose control of the assets whilst you're alive? I did ask them what if I wanted to setup a business for my wife and use the equity, and they said it was possible.

Also does it really cost a few thousand pounds? The advisers didn't mention anything about paying tax on it every 10 years or tax to put it into the Trust.

You lose control plus you may end up paying a large amount in administration fees. Try a Google of Drawbacks of Trusts uk and have a look. This is one I found:
http://www.lawskills.co.uk/articles/2013/08/asset-protection-trusts-appropriate-or-dangerous/

ey143

Thanks, some very useful tips here.

how much should I expect to pay for impartial advice, I would probably need no more than an hour's worth on only this topic.

I assume nobody else here in this thread has opted for one of these schemes? Is there a more simple way of tax planning for inheritance which is efficient and doesn't involve gifting away the asset?

agrinnall

Daniel54 wrote: »

Proceeds from life insurance do not form part of your estate for IHT purposes.Nor do your Death in Service benefits,which will be distributed by the trustees ,almost always in accordance with the form you have completed setting out your wishes,which I assume is in favour of your wife.

You seem to have quoted the OP then responded to something different - he specifically stated that the IHT liability would be on the death of his wife and the distribution of her account to their child(ren).

Mrs_pbradley936

ey143 wrote: »

Thanks, some very useful tips here.

how much should I expect to pay for impartial advice, I would probably need no more than an hour's worth on only this topic.

I assume nobody else here in this thread has opted for one of these schemes? Is there a more simple way of tax planning for inheritance which is efficient and doesn't involve gifting away the asset?

Well since you mentioned it have a look at the advice I was given in the last day or so:
https://forums.moneysavingexpert.com/discussion/5066295


Although the property mentioned is not and never has been our family home. Plus 7 years will not be any good if your child is a toddler now. You should have a legal guardian in place via a will and the same person that would look after the child day to day need not be the same person that has control of the finances.

Your_Hero

ey143 wrote: »

Thanks, some very useful tips here.

how much should I expect to pay for impartial advice, I would probably need no more than an hour's worth on only this topic.

I assume nobody else here in this thread has opted for one of these schemes? Is there a more simple way of tax planning for inheritance which is efficient and doesn't involve gifting away the asset?

For your main residence, there isn't much you can do, particularly as you are still very young (and your children too) for IHT planning.

Probably the simplest way for you would be to take out life insurance (whole of life, second death) written in trust to cover the expected IHT bill at present and review it regularly.

Savvy_Sue

ey143 wrote: »

The problem is, if something happened to me today, then my employer's death in service benefit and my life assurance policy would be sufficient together with my wife's savings be liable to a significant inheritance tax bill for my daughter and future children.

You could each consider passing some of these assets direct to your children, with either or both the life insurance and any death in service benefit going to them. Obviously you'd need to be sure your wife didn't immediately need them, and vice versa, and you'd still need a trust if this happens before the children are 18, plus you'd need to change the elections if you have more children, plus no doubt many other things ... but worth considering.

Because

Daniel54 wrote: »

Proceeds from life insurance do not form part of your estate for IHT purposes.Nor do your Death in Service benefits,which will be distributed by the trustees ,almost always in accordance with the form you have completed setting out your wishes,which I assume is in favour of your wife.