Published on: 13th September 2016

Britain's top billionaire avoids huge Inheritance Tax bill

The death of the Duke of Westminster has seen campaigners calling for the Trust system to be reformed, after it was announced that most of his £9 billion estate will remain clear from Inheritance Tax (IHT).

Reports state that the IHT bill on the estate should have been approximately £4 billion. However, the Grosvenor family (whose head was the Duke of Westminster) has been clever with the Trust structures, allowing them to pass assets down through the generations without attracting big death duties.

A Trust structure means that assets are legally owned by the family as Trustees, not individually. This means they aren\'t subject to tax when a family member passes. As one of the Trustees, the Duke could buy and sell assets within the Trust but he didn\'t have the absolute rights over them.

Trusts and other similar structures are part of the legal framework because they have useful purposes, some being unrelated to tax planning. The role of a discretionary Trust is to shield family assets across generations - kind of working as an insurance policy.

In theory, anyone could set up a discretionary Trust in an attempt to avoid IHT but in doing so, the costs involved could be prohibitive. Recent tax changes mean that Trusts are less attractive to those who want to establish them afresh; they attain a 20% tax of the value of the assets being placed into Trust and a periodic charge of around 2-6% every decade.

We are often asked by families about Trusts in Wills. It is important to remember that even though the Trust in the Will is treated as coming into effect when a person passes, there could be some decisions for the named Trustees to make and legal documents may need to be drafted to be able to set up the Trust appropriately.

At Casey & Associates we can assist you with the creation of Trusts and answer any questions you may have. Click here for more information.

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