How can I use a trust to reduce my Inheritance Tax?


We often find when talking to clients that they are unaware of what a trust is, how it operates, and what the advantages can be.

In this video, Edward Marriage from MHA Henderson Loggie discusses trusts and if they can benefit you or your family.

Covered in this video:

✅ What is a trust?
✅ What is the purpose of a trust?
✅ What are the benefits of a trust?
✅ Are trusts suitable for everyone?

📌 If you have any questions, please contact Edward directly at edward.marriage@hlca.co.uk


*Edited video transcript*


What is a trust?

A trust is a way for individuals and families to control how their assets are transferred. It’s a legal concept involving the holding of assets for the benefit of others. Here at MHA Henderson Loggie, we worked with a variety of different trusts. The main three being a bare trust, an interest in possession trust and a discretionary trust. The trust that’s right for you will very much depend on your individual circumstances.


What is the purpose of a trust?

Often the main reason our clients look to set up a trust is to remove assets from their estate for the purposes of saving inheritance tax. This is potentially a 40% saving. If you wish to remove assets from your estate, you could simply gift these in your lifetime.


What are the benefits of a trust?

Well, one of the most appealing aspects that our clients find is control. Because you can specify the terms and conditions of a trust, you can control when and to whom distributions from the trust are made. This is very effective when dealing with children or young people and people that can’t take care of themselves.

Another great benefit of a trust is the protection of your family’s assets. Once you place assets into a trust for your children or your grandchildren, going forward into the future if they were ever to be married and unfortunately divorced, these assets can be ring-fenced and not included in the marital estate. This gives you great protection going forward into the future for your family.

In addition to the inheritance tax relief that trust can offer, they also offer great chances to reduce your income tax liabilities. This can be done with school fee planning in particular. Check out our video on this topic: How can Grandparents fund school fees in a tax-efficient way?


Are trusts suitable for everyone?

There are costs to running a trust as well as some administrative burdens. However, depending on you and your family circumstances, they can be extremely valuable. This would have to be looked at on a case by case basis


In summary

This has been a very brief overview of trusts. If you have any questions concerning the material covered, then please contact Edward at edward.marriage@hlca.co.uk