Trusts used for Inheritance Tax planning
Mr Cameron wants to reduce his estate for IHT purposes, and is ready to give away some assets during his lifetime to reduce the value of his estate in order to do so.
He is aware that he will have to survive any gifts by 7 years before their value can completely escape the IHT net, and is now considering which of his assets he can afford to give away.
His income producing assets are out of the question because he needs the income, and he doesn’t want to give his home away because he wants to continue living in it; however, he is perfectly happy to pass on some valuable family heirlooms because he no longer wants the burden of looking after them himself.
Unfortunately, the heirlooms have increased greatly in value since he acquired them and, even though he won’t receive any payment, the disposal will nevertheless be chargeable for capital gains tax purposes and that means there will be significant sums of CGT to pay if he makes an outright gift of them.
A properly drafted trust will allow Mr Cameron to gift the asset without paying CGT and will also result in a significant reduction in the IHT payable by his estate.
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