Trusts could help more families

A Shropshire accountant has set out to bust the myth that trusts are only helpful for the super wealthy.

Natalie Bate, from Dyke Yaxley Chartered Accountants in Shrewsbury, said: “Many people feel that trusts are scary, over-complicated tools that were designed to help the extremely wealthy.

“And while they are commonly used by people in the high net worth community, you don’t need to be a millionaire to benefit from them.”

Natalie said if your total assets exceed £500,000, then trusts could potentially be a great solution when it comes to Inheritance Tax.

“Everyone will have a nil rate band of £325,000, which means the first £325,000 of your estate is free from IHT.

“Many may also qualify for the £175,000 residence nil rate band which relates specifically to anyone who passes their main residence down to their children or grandchildren.

“But anything over £500,000 is likely to be subject to 40% IHT, and although gifting can help reduce this burden, trusts are actually another viable option.”

Natalie said unlike gifting outright, a trust allowed you to retain control over the asset, as well as enabling you to pass it on to anyone under 18 who would be too young to legally own the asset.

“As accountants, our most common use of trusts is when grandparents put their rental property into trust for their under age grandchildren.

“After seven years, the trust will then have its own £325,000 nil rate band which could save up to £130,000 in IHT.

“And the rental income can then be issued – at the grandparents’ discretion – to the grandchildren. They would then be taxed personally using their £12,750 tax free personal allowances, rather than the grandparents facing the tax charge.

“Trusts could be of benefit to a whole host of families who may be entirely unaware of the advantages they bring. If you want to explore the possibilities, it’s important to take professional advice before any decisions are made.”

Pictured: Natalie Bate from Dyke Yaxley Chartered Accountants