The Association of British Insurers has received written confirmation from HM Revenue & Customs that bare trusts for minors will not be treated as a settlement for IHT purposes.
The implications of a CLT would be an immediate IHT charge of 20% where the value of the gift exceeded the nil rate band (£300,000 for tax year 2007/2008).
This contrasts with a PET where there is no upfront IHT charge regardless of the value gifted. A CLT also involves periodic charges on the ten yearly anniversaries of the trust and an exit charge when capital is distributed to beneficiaries.
Commenting, Julie Hutchison, estate planning specialist at Standard Life, said: “Advisers and their clients can now use bare/absolute trusts with confidence where minor beneficiaries are being named, without the previous worry that this would be treated as a CLT. We can now return to business as usual with bare/absolute trusts.”
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