Top 3 inheritance tax queries from financial advisers
By Robbie Lawther, 8 May 19
IHT is a complex issue for many wealthy clients but Canada Life is asked about these issues the most
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2. What needs to be included when valuing a trust?
Answer: It depends on the type of trust involved.
Calculating trusts can differ when it comes to discretionary gift trusts, gift and loan trusts and discounted gift trusts.
Jarvis added: “Under a gift and loan trust, any outstanding loan due back to the settlor needs to be deducted from the value of the trust.
“For a discounted gift trust, if the settlor is still alive, the trustees have an obligation to provide regular payments to them and the actuarial value of this commitment should be deducted from the value of the trust.
“When looking at what distributions need to be factored into the periodic charge calculation, these refer to distributions to beneficiaries.
“If the trust allows reversions back to the settlor and these are correctly carved out in the trust at outset, they will not be treated as distributions. Likewise, neither will any loan repayments made to a settlor under a gift and loan trust be treated as a distribution.
“Trustees will need to be aware of previous transfers made by the settlor and that these gifts can have an impact for the lifetime of the trust.
“As more and more discretionary trusts are approaching their 10th anniversary, questions around how the periodic charge is calculated have increased.”
Tags: Canada Life | IHT
