Family trusts are not just a means of avoiding inheritance tax; they can provide an effective way for parents to retain some control of assets, while passing them to adult children.

Successive governments have viewed family trusts as a tax avoidance ruse and have imposed increasingly unfavourable taxes; most recently in 2006 with the introduction of 20pc inheritance tax (IHT) on setting up a trust worth more than the nil rate band (currently £325,000 per person). From April 6 2010, many trusts will also be liable to tax at 50pc on income it receives, so the tax incentives for creating trusts are diminishing.

However, the history of trusts is very different; its purpose not being to avoid tax but to provide a very effective way of protecting assets, typically family wealth, for future generations. Protect from whom? Well, not just the taxman but in some cases it can protect from legal challenges, marriage breakdown and frivolous children who may be tempted to blow the lot on yachts, cars, expensive holidays and many other things I will leave you to imagine.

Trusts can be set up at different times, for example at any time during an individual’s lifetime if they want to make provision for someone; on perhaps a special occasion such as the birth of a child or the marriage of an adult child; or on death – a trust can be created in a will.

Read Full Telegraph.co.uk Article Here
By Gary Heynes

Contact us if you have any concerns over your own family inheritance tax.