Trusts and their uses in tax planning

• Discretionary trusts
• Accumulation and Maintenance trusts
• Interest in Possession trusts

All can present opportunities for the mitigation of your tax burden.

What is a trust?
Briefly, a trust is a binding obligation to deal with property in a particular way, for the benefit of certain individuals, known as beneficiaries. The obligation is imposed upon trustees, who become the legal owners of the trust property. The person placing property into trust is known as the settlor. The settlor would normally appoint the trustees, of whom the settlor may be one.

How is a trust created?
Normally by way of deed, although a trust can sometimes be oral and can also be created by the terms of a Will and by the rules of intestacy, if a person dies without making a Will.

Tax planning
Accumulation and Maintenance trusts are commonly used by grandparents who wish to benefit grandchildren, perhaps helping out with school fees. They offer a mechanism by which income can be diverted from a 40% tax charge to a non-taxable situation and at the same time are extremely inheritance tax effective.

Interest in Possession Trusts, as a tax planning tool, are often used where, for one reason or another, it is desired to crystallize a disposal of a particular asset but the individual wishes to retain beneficial ownership. Topical uses involve preserving the full benefit of capital losses for off-set against future capital gains, avoiding one of the adverse affects of the taper relief legislation. They also preserve the possibility of the bed and breakfasting of shares, which was generally curtailed in the 1998 Finance Act and can serve to maximise the availability of taper relief where full business asset relief would not otherwise be achievable.

Discretionary trusts come into their own in the context of the availability of gift relief, which might otherwise not be available on an outright gift between individuals. They, too, offer particular inheritance tax savings and often form an essential part of estate planning.

Whiting & Partners offer a comprehensive, value for money service on Trusts and all areas of Estate planning. We provide advice on: -
• The creation of a trust and the type of trust most appropriate for your objectives.
• Appropriate notification to the Inland Revenue.
• An on-going compliance service covering the filing of the necessary Tax Returns.
• Will Planning and Estate Planning.
• Enduring Powers of Attorney.
• Deeds of Variation.