Saving tax can be a matter of trusts
If it's good enough for the Prime Minister and his wife, it should be good enough for me, writes William Kay.
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Your support makes all the difference.That has been the attitude of many people this week after they read about the blind trust which Tony and Cherie Blair used to buy two flats in Bristol.
But legal experts were quick to point out that may sound like the sort of exotic device the rich and famous use to squirrel away their wealth, in practice they are of little benefit to the rest of us. But other types of trust could be worth looking at.
"The important point is that there are no tax benefits in having a blind trust," said Danby Bloch of the specialist publisher Taxbriefs. "They are required for politicians or business people who have to avoid conflicts of interest. And they conceal the names of the true owners of an asset, which appears to be one motive for the Blairs with their Bristol flats. But these are hardly considerations for most people."
There has been much more focus on trusts recently, because a growing number of home owners have found their house or flat is now worth more than the £250,000 at which inheritance tax (IHT) begins to bite.
Stephen Pallister, tax and trust partner at the solicitor Pinsent Curtis Biddle and a member of the Law Society's wills and equity Committee, said: "Children under 18 cannot legally give a valid receipt for money or assets, so whatever is left to them, whether on death by someone's will or by a lifetime gift, will need to be held in trust for them until they are of age.
These are the main types of trust to think about:
Life interest: a beneficiary is given the right to trust income only, with the trustees being able to pay trust capital to them;
Discretionary: trustees have discretion over who among a class of beneficiaries receives income and capital of the trust. Income not distributed can then be accumulated;
Accumulation and maintenance: like a discretionary trust, but used only for children and grandchildren under 25. It has special inheritance tax advantages;
Bare: trustees simply hold assets for a beneficiary who is actually entitled to those assets, and can call for them from the trustees. A blind trust is a type of bare trust;
Charitable: the trustees hold assets for purposes and not persons. Such a trust could be registered as a charity with the Charity Commission and would, therefore, enjoy certain tax breaks.
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