Setting up a Trust Fund to Avoid Inheritance Tax

textbook

Had an encounter few years ago of someone who befriended an isolated old, very out of touch, foreign lady.  It was obvious they were trying to get in on the will.  When the lady died I downloaded the probate and this person was sharing half of it with a nephew.  Anyhow, not knowing anything about wills but the whole thing looked, felt immoral I emailed the probate info to a solicitor who told me as the figures on probate-  gross £420,000 and net £297,000   this difference -£123,000 between net and gross was too high and that they had who wormed their way onto the will and had gifted themselves money too. 

    I thought this would be illegal but after talking to someone the other day who worked in finance and fraud he said this person would have set up a trust fund and got the vulnerable old lady to sign a form to allow money from her accounts to go into this fund ( a solicitor would have set this up).   This would have allowed this person to avoid inheritance tax and pocket the extra money - possibly an extra £100,000 on top of their half of inheritance.   This person who befriended the old lady had power of attorney, was the executor of the will and obviously now a beneficiary.      This person went in as a gardener and then became her 'friend' for a few years before her death and lives in her house now lol

Was a crime committed or is it true (what this finance guy said) they couldn't have just  transferred money from old lady's account to their own account (banks wouldn't allow a person with power of attorney only to transfer £100,000 into her own account)  so she must have set up this trust fund with a solicitor?   

Keep_pedalling

There are many reasons why the too figures could have that big difference, and it is a massive leap to assume it was do to a trust. Trusts in themselves to not avoid IHT.

macman

Someone with a POA has the same rights over the bank accounts as the account holder does, so yes, they could transfer the entire contents of the account to any other that they wish to.

Marcon

textbook said:

Was a crime committed or is it true (what this finance guy said) they couldn't have just  transferred money from old lady's account to their own account (banks wouldn't allow a person with power of attorney only to transfer £100,000 into her own account)  so she must have set up this trust fund with a solicitor?   

There's not nearly enough information to answer with any accuracy.

p00hsticks

textbook said:

 gross £420,000 and net £297,000   this difference -£123,000 between net and gross was too high

There are plenty of reasons for a large difference between the gross and net value of an estate. Where property is involved the obvious one is that there was a mortgage or other loan such as equity release against the property.

textbook

p00hsticks said:

textbook said:

 gross £420,000 and net £297,000   this difference -£123,000 between net and gross was too high

There are plenty of reasons for a large difference between the gross and net value of an estate. Where property is involved the obvious one is that there was a mortgage or other loan such as equity release against the property.

The value of property was over £600,000 easily at the time yet she had £420,000 gross, she had no real pension so probably equity release.  No mortgage.

textbook

macman said:

Someone with a POA has the same rights over the bank accounts as the account holder does, so yes, they could transfer the entire contents of the account to any other that they wish to.

Really?    This finance guy I was talking to said the person with POA couldn't transfer huge amounts e.g. £100,000 without it alerting the bank.   He said that's why a trust was possibly used through a solicitor and old lady's signature needed perhaps when she was vulnerable.  If you're right though a crime could've been committed and if so is it worth reporting this to fraud online? I thought they could just check the bank transfers.   This finance guy also warned me that if this happened they still wouldn't investigate this because it would cost too much too to investigate though

Marcon

textbook said:

macman said:

Someone with a POA has the same rights over the bank accounts as the account holder does, so yes, they could transfer the entire contents of the account to any other that they wish to.

Really?    This finance guy I was talking to said the person with POA couldn't transfer huge amounts e.g. £100,000 without it alerting the bank.   He said that's why a trust was possibly used through a solicitor and old lady's signature needed perhaps when she was vulnerable.  If you're right though a crime could've been committed and if so is it worth reporting this to fraud online? I thought they could just check the bank transfers.   This finance guy also warned me that if this happened they still wouldn't investigate this because it would cost too much too to investigate though

The bank might well have 'alerted' but that doesn't mean the transfer couldn't proceed. If you think a crime has been committed by all means report it and see what happens - but as I've said above, there's not nearly enough information to assess the position here. Maybe get some proper professional advice from someone to whom you've provided all the relevant facts?

Malthusian

Your friend works in finance and fraud but was willing to make entirely unwarranted assumptions about trust funds being set up, on no evidence whatsoever? When there were numerous alternative explanations which anyone with a good grasp of finance could have reeled off (as they have in this thread)?
What does he do in finance and fraud, make tea and order paperclips?

textbook said:

Really?    This finance guy I was talking to said the person with POA couldn't transfer huge amounts e.g. £100,000 without it alerting the bank.   

It would be just as easy or hard to transfer £100,000 into the Attorney's account as to transfer £100,000 into some trust that had been set up for the Attorney's benefit.
In itself there is nothing illegal about someone choosing to leave money to a friend who has looked after them for years instead of a nephew. (Whether she even knew the nephew from Adam has not been stated.)
Anyway, if she had gifted £100,000 to her Attorney or to a trust, long enough ago to fall outside her estate, it would reduce the gross and net value of her estate, not just the net one. If this hypothetical gift was made in the last few years of her life then it may not have reduced the value of her estate at all, due to being a failed PET. (There is no evidence in your posts that any such gift was made at all.)

textbook said:

The value of property was over £600,000 easily at the time yet she had £420,000 gross, she had no real pension so probably equity release.  No mortgage.

Equity release is a mortgage.

textbook

Malthusian said:

Your friend works in finance and fraud but was willing to make entirely unwarranted assumptions about trust funds being set up, on no evidence whatsoever? When there were numerous alternative explanations which anyone with a good grasp of finance could have reeled off (as they have in this thread)?
What does he do in finance and fraud, make tea and order paperclips?

textbook said:

Really?    This finance guy I was talking to said the person with POA couldn't transfer huge amounts e.g. £100,000 without it alerting the bank.   

It would be just as easy or hard to transfer £100,000 into the Attorney's account as to transfer £100,000 into some trust that had been set up for the Attorney's benefit.
In itself there is nothing illegal about someone choosing to leave money to a friend who has looked after them for years instead of a nephew. (Whether she even knew the nephew from Adam has not been stated.)
Anyway, if she had gifted £100,000 to her Attorney or to a trust, long enough ago to fall outside her estate, it would reduce the gross and net value of her estate, not just the net one. If this hypothetical gift was made in the last few years of her life then it may not have reduced the value of her estate at all, due to being a failed PET. (There is no evidence in your posts that any such gift was made at all.)

textbook said:

The value of property was over £600,000 easily at the time yet she had £420,000 gross, she had no real pension so probably equity release.  No mortgage.

Equity release is a mortgage.

The will was changed in 2013 and the old lady died 2017.   With power of attorney, could they have not put the money into the attorney or trust fund but from old lady's account to their own?

Linton

textbook said:

Malthusian said:

Your friend works in finance and fraud but was willing to make entirely unwarranted assumptions about trust funds being set up, on no evidence whatsoever? When there were numerous alternative explanations which anyone with a good grasp of finance could have reeled off (as they have in this thread)?
What does he do in finance and fraud, make tea and order paperclips?

textbook said:

Really?    This finance guy I was talking to said the person with POA couldn't transfer huge amounts e.g. £100,000 without it alerting the bank.   

It would be just as easy or hard to transfer £100,000 into the Attorney's account as to transfer £100,000 into some trust that had been set up for the Attorney's benefit.
In itself there is nothing illegal about someone choosing to leave money to a friend who has looked after them for years instead of a nephew. (Whether she even knew the nephew from Adam has not been stated.)
Anyway, if she had gifted £100,000 to her Attorney or to a trust, long enough ago to fall outside her estate, it would reduce the gross and net value of her estate, not just the net one. If this hypothetical gift was made in the last few years of her life then it may not have reduced the value of her estate at all, due to being a failed PET. (There is no evidence in your posts that any such gift was made at all.)

textbook said:

The value of property was over £600,000 easily at the time yet she had £420,000 gross, she had no real pension so probably equity release.  No mortgage.

Equity release is a mortgage.

The will was changed in 2013 and the old lady died 2017.   With power of attorney, could they have not put the money into the attorney or trust fund but from old lady's account to their own?

Power of Attorney only gives one authority to act in the best interests of the donor, not in the interests of their beneficiaries, unless there are special circumstances approved by the Court of Protection. It is difficult to see how relieving the old lady of her wealth would be seen as acting in her best interests.