Brian Murphy, senior financial planning manager at Axa Life, believes there is still a future for di...
Brian Murphy, senior financial planning manager at Axa Life, believes there is still a future for discretionary will trusts and discounted gift trusts (DGTs) under the new IHT legislation.
The nil-rate band legislation introduced at the start of this tax year allows the transfer of any unused allowance on a person's death to the estate of their surviving spouse.
The provisions apply to anyone who died after 9 October 2007, regardless of when their spouse died. The claim must be made within 24 months of the date of death, and no more than 100% of the nil-rate band will be available.
Murphy told the International Investment London Forum that the proposals are most likely to affect those whose main asset is their private residence and who have not implemented any IHT planning strategy. The proposals do not affect lifetime giving, and planning is still required for cohabiting couples.
Discretionary will trusts will still be useful to control the future distribution of assets, which can be particularly useful in cases of divorce and where there are stepchildren. They can also be used where the assets in the trust may grow faster than the nil-rate band, and are suitable for non-married couples with children.
The Revenue requires that an accurate assessment of the value of the gift is made at the outset. In most cases, there is no need to report it if the transfer does not exceed 80% of the nil-rate band.
Although the situation for DGTs for the over-90s is still being disputed in the courts, Murphy believes the overall DGT news is good: "The Inland Revenue has recognised the efficacy of discounted gift schemes, which is important for solicitor introducers."
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