Lifetime Trust
Trust Matters Estate Planning Arrangement (LATESS)

For individuals and married couples with estates in excess of £312k and £624k respectively. For use in conjunction with the Discretionary Will Trust Arrangement

For individuals and married couples with estates in excess of £312k and £624k respectively, there would currently be an Inheritance Tax liability on death (second death for a married couple). Based on current legislation this would be 40% of the excess and is generally payable by the beneficiaries before they have access to the estate.

The LATESS Trust is a lifetime arrangement i.e. it is in existence now and is designed to: -

1. Provide funds that are immediately accessible to your beneficiaries to meet any Inheritance Tax liability
2. Reduce or eliminate any Inheritance Tax liability that may exist

The LATESS Trust works perfectly in conjunction with the Trust Matters Discretionary Will Trust for estates with an existing Inheritance Tax liability. In this situation the LATESS trust would be used during your lifetime to achieve one or both of the points stated above and the Will Trust would be used on first and second death.

Please click here for further information on our Will Trust.

As with the Will Trusts, the following points will also apply to assets placed into the LATESS Trust:

1. All growth on these assets is outside of your estate for IHT purposes.
   
   If assets up to the nil rate band are placed into trust on first death and it grows in line with the increase in the IHT threshold then the same proportion of the total estate will be free from IHT. However at the 10 year anniversary of the trust there will be a 6% charge on any assets over the nil rate band at that time. This is known as the Period Charge.
   
   If these assets are passed on to the surviving spouse then any growth beyond the double nil rate band will be in their estate which will increase the IHT liability on their death. The tax charge is 40%.
   
   
2. Any capital gain (growth) on property from the time that it is placed in trust should be taxed at 18% when it is sold (with effect from 6 April 2008) in line with recent legislation. If this property had not been placed in trust then any growth could be subject to 40% Inheritance Tax as it is growing within your estate.
   
   With effect from 6th April 2008 the maximum level of Capital Gains Tax payable has reduced from 40% to 18% and this change will also apply to the capital gains tax payable by discretionary trusts.
   
   Where an estate is over a certain size i.e. already subject to Inheritance Tax, any further growth in the estate will of course be subject to IHT at 40%. In the scenario where the trust has not been utilised and the asset that would have been conveyed into the trust was property you will be paying 40% tax instead of 18% on any growth, plus 6% periodic charge (at the 10 year anniversary) i.e. 24% compared to almost double that.

 
3. These assets are not counted as part of the surviving spouse’s estate for later life care means testing.
   
   If all assets are passed to the surviving spouse and later life care becomes an issue then this could have huge financial implications.
   
   This also applies to any assets placed into trust during your lifetime.
   
   
4. These assets are free from Inheritance Tax (IHT) for the trust period i.e. up to 80 years, if kept below the prevailing nil rate band on each 10^th anniversary.
   
   One would hope that their children will be in the position to fully utilise their own nil rate bands. Any assets that pass directly into their estates will therefore simply be increasing the IHT that their children, your grandchildren, will have to pay.
   
   Assets passed to your children / grandchildren in trust are available to them but are
   outside of their estates.
   
   
5. These assets can be protected from any divorce proceedings that your children / beneficiaries may be involved in.

 
6. These assets are protected from bankruptcy proceedings that your children / beneficiaries may be involved in.
   
   
7. These assets are immediately available to the beneficiaries to pay any outstanding Inheritance Tax liability on second death.

 
8. These assets can be accessed by the surviving spouse after first death, as you are both beneficiaries of each others trusts.

 
9. Where an estate includes a second property – gifting a proportion of this property to trust can reduce the IHT liability on your estate in two ways.
   
   i) The 7 year rule.
   ii) HMRC discount on jointly owned assets for IHT purposes by up to 15%.

 
10. If you have remarried or may remarry in the future following the death of a spouse, utilising discretionary trusts can achieve greater IHT savings and ensure that the destination of those assets is your children.

The Will Trust arrangement can be done through the post but the LATESS arrangement will require a face-to-face meeting.

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Call 01727 737610 to book your place