- There is, as you will know, spousal exemption from inheritance tax in this country. Thus, if you are both resident and domiciled here and have no property abroad, the survivor of you can inherit all your combined assets without having to pay any capital tax.
- However, upon the death of the survivor of you, tax would then be payable upon the entirety of the estate remaining, after taking account of the exempt slice. At August 2007, the inheritance tax rate is 40%, and the exempt slice £300,000.00.
- Many arrangements to mitigate this tax involved significant cost during your joint lives and/or some loss of control over your assets at some point in time.
- A loan trust need have neither of these disadvantages. It involves inclusion in your wills of a provision that, on first death, leaves everything to the survivor, excepting only the amount of the exempt slice.
- An amount equivalent to the exempt slice is loaned to the surviving spouse for his or her lifetime and is thus repayable to the estate of the first to die, upon the survivor’s death.
- Thus, if the remainder of your combined estates on second death is sufficiently large, you will between you have gained the full benefit of the exempt slice on both estates, rather than on only the estate of the survivor (as would otherwise be the case).
- When you create a loan trust, it may be desirable to sever the joint tenancy of your property to create a different kind of co-ownership. This should not give rise to any practical disadvantage.
For further information and an estimate of the cost involved, please contact katherine@kitegriffin.co.uk
