She warns, however, that the rules around IHT and gifting will need to be considered.
“While as a rule it is not tax-efficient to gift an asset away and retain some benefit, this can be possible with the right trust,” she says.
“This helps to deal with the dilemma of reducing an estate for IHT by making a gift but being able to retain accessto regular payments or capital sums.”
She continues: “While the initial gift to a trust has the potential to be subject to IHT, this can be managed; gifts below the IHT nil rate band will not suffer lifetime tax.
“The trust will be subject to its own IHT regime, with an IHT event every 10 years and potentially when assets leave the trust.
“But the IHT payable will not be more than 6 per cent of the asset value held by the trustees and, in the vast majority of cases, will be at a lower rate and a potential 0 per cent.”
This means that trusts can be tax effective and, while there are likely to be costs in setting up a trust arrangement, “spending a couple of thousand pounds to protect many more thousands in assets should not be cost-prohibitive’,’ says Ms Philpott.
“There are potentially ongoing tax and regulatory requirements to be met after setting up a trust but the administrative time and cost will be small in comparison to the potential IHT saving.”
Victoria Ticha is a features writer at Financial Adviser and FTAdviser.com
