Inheritance Tax Solutions - Trustees of IIP Trusts
How can we save/reduce IHT payable upon death of the Life Tenant?
- Mr and Mrs White in second marriage
- Children from first marriages
- Upon Mr White’s death IIP Trust is established
- His estate value, £500,000, passes to Trust
- Mrs white’s remaining estate value exceeds IHT free amount
- Mrs White = Life Tenant entitled to income
- Children = Remaindermen entitled to capital
- Upon death of Life Tenant IHT payable by Trustees = £200,000
- Children’s capital value reduced to £300,000
- Trustees invest £500,000 capital into a (or a range of) suitable Business Property Relief (BPR) qualifying investments
Benefits from advice given
- After holding the investment for 2 years, the trust investment is removed from Life Tenant’s taxable estate
- Regular income payable to the Life Tenant throughout their lifetime
- Trustees retain control and access
- Children benefit from any capital growth
- Interestingly, even if the investment fell in value, by say 20%, on death the reduced value to the children still represents a greater return than doing nothing (by £100,000)
- After 2 years the Trustees have eliminated the entire IHT bill - a saving of £200,000
- Trustee may be more generous with income payments to Life Tenant as capital appreciation met from IHT saving
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We will look to carry out a regular review of your circumstances, objectives, needs and portfolio performance to ensure all arrangements continue to be suitable and advise of any changes that may be appropriate.
This example is for illustrative purposes only, based on current legislation and tax allowances. Tax rules and regulations are subject to change.