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Inheritance Tax and Trusts

What is Inheritance Tax?

Inheritance Tax (IHT) is essentially a tax on death. It is often described as being "a voluntary tax", meaning that it is avoidable with the right assistance and planning. It is certainly true that many people are frequently astonished at the amount of IHT that is payable upon the death of a relative or friend. With a rate of 40% payable on all assets over £325,000 (from April 2009) it is easy to see how the tax can mount up if care is not taken during your lifetime to minimise your potential liability.

So what can and should you do? While the simple answer is to give all your assets away before you die this may not always be the most prudent and tax efficient way. You should seek independent financial advice from our Financial Advisory Company Total Wealth Planning.


What is a Trust?


Trusts are a very useful legal way of giving your money, property or shares, to others, whilst ensuring that you, or others that you trust (hence the name), retain some control over what happens to those assets.


You will want to ensure that your wealth is properly managed and distributed after your death, so that it provides for the people who depend on you and is enjoyed by your heirs in the way you intend.

By using trusts this can help you to achieve some control over what happens to your estate, both immediately after your death and for generations to come.


For example, you could use a trust to postpone the transfer of assets to a child until they reach maturity, with the income being distributed at the trustees’ discretion until that date. Other reasons may be:


  • to reduce inheritance tax payable

  • ensuring the estate goes to the family as intended

  • to provide for disabled beneficiaries while preserving their entitlement to social security benefits

  • helping separated or divorced parents pass wealth down the bloodline

Placing assets in trust also ensures that they will pass smoothly to your heirs without the delays, costs and publicity often associated with probate.


Alongdside Financial Specialists at Total Wealth Planning we have expertise in establishing, administering and managing trusts, and can provide specialist advice and trust arrangements which meet your exact needs. You can also be sure that the assets in your trust will be expertly managed.

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