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Trust or not
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seaside25
Posts: 4 Newbie

My mum died last year and myself and 2 brothers are the sole beneficiaries of her estate (3 way split). Her estate is basically her house which we have just sold for £135,000. My younger brother lived with my mum and we want to relocate him near to where I live. My older brother and I have set up a Deed of Variation so our share of the estate goes to my brother so he can buy a flat. My father (divorced from my mum) will gift about £80,000 in to the purchase of the flat. My solicitor has said that we should set up a trust to protect the flat (asset) and myself, older brother and Dad would be trustees and my younger brother the beneficiary.
I thought this was all straight forward but my dad has said that he if he dies in the next 7 years after gifting the £80,000 there will be IHT of 40% to pay on this. I know this is correct and it would come from my fathers estate and it wouldn't be my brother having to find the money or perhaps I've missed something? Its a little tricky to reason with him.
Its a bit confusing and sorry for long-winded background story but I am wondering if anyone has any similar experience of trusts like this and if the £80,000 gift was part of a trust would he still have to pay IHT tax if he died within 7 years ( i know about the taper relief). Do we need to even bother with a trust to protect my brothers property?
Thank you for any advice or thoughts.
I thought this was all straight forward but my dad has said that he if he dies in the next 7 years after gifting the £80,000 there will be IHT of 40% to pay on this. I know this is correct and it would come from my fathers estate and it wouldn't be my brother having to find the money or perhaps I've missed something? Its a little tricky to reason with him.
Its a bit confusing and sorry for long-winded background story but I am wondering if anyone has any similar experience of trusts like this and if the £80,000 gift was part of a trust would he still have to pay IHT tax if he died within 7 years ( i know about the taper relief). Do we need to even bother with a trust to protect my brothers property?
Thank you for any advice or thoughts.
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Comments
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The obvious question it is why does the solicitor think your brother needs a trust to protect him? Is it purely because of the inheritance tax, or is there another reason?All shall be well, and all shall be well, and all manner of things shall be well.
Pedant alert - it's could have, not could of.1 -
He has totally misunderstood the IHT implications of gifting. Through is that there are no negative implications in making this gift. The worse that can happen is that his estate will pay the same amount of tax as it would if he had not made the gift.1
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elsien said:The obvious question it is why does the solicitor think your brother needs a trust to protect him? Is it purely because of the inheritance tax, or is there another reason?0
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seaside25 said:elsien said:The obvious question it is why does the solicitor think your brother needs a trust to protect him? Is it purely because of the inheritance tax, or is there another reason?
All shall be well, and all shall be well, and all manner of things shall be well.
Pedant alert - it's could have, not could of.0 -
elsien said:seaside25 said:elsien said:The obvious question it is why does the solicitor think your brother needs a trust to protect him? Is it purely because of the inheritance tax, or is there another reason?0
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seaside25 said:elsien said:seaside25 said:elsien said:The obvious question it is why does the solicitor think your brother needs a trust to protect him? Is it purely because of the inheritance tax, or is there another reason?
However, you are correct a trust of your father's contribution would not of itself protect from IHT if death with 7 years. However, if he has made no other gifts other than what is now contemplated, all that happens is his nil rate band on death is reduced by £80k at that point so the rest of his estate bears more IHT by virtue of the earlier gift.
If he really wants to ensure his estate is not disadvantaged by this gift he could consider (depending on his age) 7 year level term assurance in trust for the estate beneficaries to enable them to pay the extra tax, if he does not survive the requisite period.1 -
seaside25 said:elsien said:seaside25 said:elsien said:The obvious question it is why does the solicitor think your brother needs a trust to protect him? Is it purely because of the inheritance tax, or is there another reason?1
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