Keeping your assets out of the clutches of HMRC when you die isn’t easy, but setting up a trust could help ensure that your money goes to your loved ones, not the taxman.
Trust funds have traditionally been seen as a tool of the uber rich – a way for wealthy families to transfer eye-popping fortunes through generation by avoiding death duties.
In August 2016, the 6th Duke of Westminster died, leaving his son Hugh Richard Louis Grosvenor not just his title but also an inheritance estimated at £9bn. Under conventional inheritance tax rules (IHT), this fortune could have resulted in a £3bn bill for the 25-year-old – almost as much as the entire death duty taken by the government in the preceding financial year. But the duke avoided the hefty bill because the estate is held in a trust structure set up in the 1950s.
But dukes and the super-rich are not the only ones who can reduce death duties. Although they are associated with blue blood families and powerful moguls, trust funds are a legitimate form of financial planning available to anyone. Yes, even if you’re a widowed grandparent who just wants to leave £20,000 (or less) to your grandchildren.
You can use trust funds to secure assets outside your estate for IHT purposes. (The existing nil-rate band will remain at £325,000 from 2018 to 2019 until the end of 2020 to 2021.)
