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Trust and Estate Taxation

Our clients, a husband and wife, jointly owned a number of rental properties. They wanted to give their daughter financial assistance to pay for their grandchildren’s private education and also mitigate their exposure to inheritance tax (IHT).

How we helped our client
EQ suggested putting some of the properties into a trust for the benefit of the grandchildren. The capital gain on the disposal of the properties to the trust could be deferred by claiming hold over relief. The value of the properties was below the nil rate band of £325,000 so no IHT was payable on the transfer to the trust. The rental income received by the trust can be distributed to the grandchildren to pay the school fees and the income tax paid by the trust reclaimed from HMRC as the grandchildren have their personal allowance available.

After seven years the value transferred to the trust will fall out of the grandparents’ estate when calculating IHT payable on death.

For more information or to discuss further, please contact the Private Client Taxperts.

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