Tax, Trusts and Inheritance Planning
Our lawyers are experienced in helping you make intelligent tax, trust and inheritance planning decisions to help reduce financial pressures for you and your family. Trusts provide a useful tool for tax planning purposes, as they are separate from your estate and therefore may be excluded from inheritance tax.
Trethowans Private Client team has a breadth of expertise when it comes to tax and unlike many other law firms, has their own in-house chartered accountant. We can help you by advising you on personal and trust taxes including:
Inheritance tax mitigation
This includes lifetime planning by making the most of your exemptions and planning for your wealth to be passed on in a tax-efficient way, whether it be through lifetime gifts, creating trusts or tax-efficient wills. We can also consider post-death variations of estates to efficiently pass assets on to the next generation. Members of the team regularly claim agricultural property relief and business property relief for estates and trusts and we can negotiate on your behalf with HMRC regarding these claims.
Capital gains tax and income tax
We can review your circumstances to ensure you are utilising all exemptions and allowances available to you and consider ways in which you can structure your assets or transactions to reduce your tax liabilities. This could include transferring a rental property into the name of the spouse who pays income tax at a lower rate, transferring assets into joint names to use two capital gains tax allowances instead of one, or assenting properties from executors to beneficiaries prior to sale, to use the beneficiaries’ allowances as well as the estate’s.
We can calculate potential tax liabilities be it income tax, capital gains tax or inheritance tax. Our work also includes checking that tax calculations provided to HMRC on your behalf are correct.
We can help you navigate different HMRC forms and act as your agent to complete them on your behalf such as your own personal tax return, a trust tax return or an inheritance tax return for the estate of a loved one who has died.
As a team we understand that every individual is different; we work not only with the client but also with other specialist advisers such as accountants or financial advisers to find the best solution for each client. As well as being able to provide expert tax advice, the team prides itself in looking after the individual and remembering that whilst tax is an important consideration, the client’s other circumstances are important and need to be balanced with tax savings.
Tax Planning and Trusts
Benjamin Franklin wrote in 1789 that “in this world nothing can be said to be certain, except death and taxes”. You cannot avoid the former but we can help ensure that the burden of the latter is kept to an absolute minimum. Good, intelligent planning can make a real difference.
Trusts provide a useful tool for tax planning purposes since they can be a good way of making tax-efficient vehicles to benefit you, your family and future generations.
There are various types of trusts that can be advantageous to you. Our experts understand that everyone’s circumstances are different and are able to advise you on the trust which is best suited to your needs.
A trust can be established for a variety of reasons and they can give you the benefit of a flexible structure for protecting your assets for future generations.
For example, you may wish to assist your children on the purchase of a property whilst preserving the contribution from an immature child, a fragile marriage or physical or mental deterioration of a family member. A trust is able to achieve this.
Our expertise in tax and trust matters will enable us to calculate your potential liability for inheritance tax or capital gains tax and guide you through the complex UK tax legislation in order to minimise your liabilities and to maximise the reliefs available to you.
We are able to provide you with ongoing advice on agricultural property relief and business property relief to reduce the inheritance tax liability, as well as the use or impact of holdover relief, rollover relief and entrepreneurs relief to reduce or postpone your capital gains tax liability.
Trusts can last for up to 125 years and it is important that you have access to advisers who can help with all the taxation issues connected with trusts, the needs of the beneficiaries and where appropriate the need to alter the original trust structure.
Our experience enables us to provide trustees and beneficiaries appropriate and tailored advice to meet your needs and circumstances on all aspects of trust law including the interpretation of the trust documentation and past actions by trustees.
Working with you and your family we will advise on:
- The creation of all forms of UK trusts and their use in tax planning and the devolution of family assets to the next generation
- Tax-efficient gifts to trusts
The change of trustees
- Distribution of trust assets and the tax consequences of doing so
- Advising existing trustees on their powers and responsibilities; statutory and under the provisions of the trust deed
- Variation of existing trust arrangements
- Inheritance tax and capital gains tax issues affecting trusts
- Holdover relief, entrepreneurs relief and rollover relief from capital gains tax
- Agricultural property relief and business property relief from inheritance tax
Tax Planning and Financial Products
It is becoming increasingly likely that you will need to consider inheritance tax in your overall financial planning. We are able to work with your financial adviser to inform you of the current rules regarding inheritance tax, to optimise the possibilities open to you and to ensure that the legal paperwork produced meets your requirements.
Certain financial products can assist in removing capital from your estate whilst providing you with an income. These products can form part of the overall inheritance tax planning strategy for you and your family and include investing in companies which qualify for business property relief and discounted gift trusts.
A discounted gift trust is designed for people who do not need access to their capital and wish to retain the right to draw a regular income. Once set up it allows a percentage of cash to be outside your estate and not liable to inheritance tax on your death. The percentage will depend on your age, sex and health as well as the size of the capital withdrawals. The balance will become fully exempt from inheritance tax once you have survived a further seven years from the date of the gift.
Life assurance may help those you leave behind to pay the inheritance tax, although life assurance cannot negate the tax due. This type of policy will pay out the cash to pay the tax as soon as it is due. Not only does this save your family from the financial worry and stress of having to find the money themselves it also enables probate (which can take some time) not to be further delayed.
It is, however, important to ensure that the insurance policy is written into trust otherwise the policy proceeds may be counted towards the value of your estate. Our experts can assist you with drafting the appropriate trust documentation and advising you of its suitability.
Working with you and your family we will advise on:
- All aspects of life assurance trusts
- All aspects of discounted gift trusts
- Maximising business property relief by investing in the alternative investment market
Many of you will have financial interests which span international borders. Even something as simple as a bank account in the Channel Islands or on the Isle of Man will need to be taken into account in succession planning, making a will or administering your estate and you will need practical and expert advice from us in order to deal effectively with those assets on death.
UK taxation is becoming increasingly complex and for those of you who are foreign nationals but have acquired assets in the UK there is an increasingly tax-hostile environment. We are able to deliver to you a sophisticated approach to incorporate family interests, your business and trusts and to advise you on a tax-efficient and practical solution enabling you to have peace of mind knowing that your wealth is secure now and for the future.
In certain European jurisdictions, such as France and Spain, forced heirship provisions apply. These create a responsibility to provide for a spouse and for children and could mean that your wishes and succession plans of your estate on death are overruled. Our wealth structuring and inheritance planning lawyers recognise that this may not be what you want and they can assist you in considering how these rules might affect your wishes and the most appropriate structure for your estate planning to limit their effect.
Our team of experts are able to pick through the complexities of residence, domicile and deemed domicile and will advise you on the implications and the options open to you. There are also different inheritance tax implications if you and your spouse have different domiciles. The term “domicle” does not mean “where you live”.
It is important to establish whether the country where assets are located has a double taxation treaty with the UK. If tax has to be paid in both countries upon the same assets it may be possible to obtain a refund. We can explain how this works in practice and whether you will be able to benefit from the double taxation treaty.
You may need more than one will to cover your assets worldwide and it is essential that any tax planning undertaken in the UK dovetails with the tax laws of another country so as to ensure that a tax solution in the UK does not give you a tax liability in another jurisdiction. We are able to work extensively with our clients’ foreign attorneys to pick a way through the complexities of making foreign and domestic law mesh with a view to achieving the best solution possible.
Working with you and your family we will advise on:
- Double taxation agreements
- Forced heirship regime
- Wills and when you need both a UK will and a will in the jurisdiction where the asset is situated
- Residence, domicile and deemed domicile and the inheritance tax implications of each
- Appropriate structure for cross border estates for succession planning purposes
- Trusts and how they apply in foreign jurisdictions
Personal Injury Trusts
A personal injury trust is suitable if you have been awarded compensation as a result of a personal injury. A personal injury trust can also be suitable where you have received a gratuitous payment as a result of a personal injury.
It is a way of keeping your lump sum compensation award separate from your other assets so that the regulations which would otherwise apply with regard to obtaining means-tested benefits are not applicable i.e. you get to keep your compensation award and your means-tested benefits.
The funds remain your own and you are able to use these funds as you please, although payments should not be made on a regular basis and you must never have a total of more than £6,000 in your own name at any one time.
The personal injury trust should be set up within 52 weeks of the first payment you receive and it is better for the trust to be set up before you receive any payment so that the payment is made straight to the trust rather than to you. If you do not set it up within 52 weeks of the first payment then it may still be possible to set up a trust but it is harder.
Why do I need a personal injury trust?
If you have been awarded damages as a result of a successful personal injury claim and receive means-tested benefits, having a lump sum of compensation in excess of £6,000 may lead to you losing your entitlement to any means-tested state benefits you receive.
If your compensation is paid into a personal injury trust, you will be able to have access to these funds (subject to some minor restrictions) and still keep your entitlement to the means-tested benefits which assist you with your day to day expenses.