As an alternative, where the nil rate band has been fully utilised by transfers into other relevant property trusts within the past seven years, or there are concerns about the impact of the proposed changes, it may be appropriate for a client to invest in BPR qualifying assets in their own name immediately.
Not only does this mean they could remove the value of this investment from their estate after just two years (unlike must trust based solutions which take seven years to be fully effective), they retain the flexibility to transfer the investment into trust at a future date.
In particular, it is worth noting that once these assets have been held for two years, an unlimited amount of value can be transferred into a relevant property trust without an immediate tax charge as shown in table 2. As normal, after seven years the value of the transfer will fall outside of the estate.
Once in the trust, the trustees can change the assets at their discretion to meet the needs of the beneficiaries. It is, however, important to note that, should the client die within seven years of the transfer, IHT will remain chargeable unless the trust continues to hold assets that qualify for BPR.
With changes possible to the taxation of trusts, advisers need to consider alternative solutions to protect their clients’ assets from IHT. Investments benefiting from BPR, either combined with a trust, or as a stand-alone investment could from part of the solution.
Simon Ruthers is private clients manager at Oxford Capital Partners
