Protect your assets

Asset Planning in Your Lifetime

Some estate planning can be made while you are alive.

Assets could potentially be gifted to beneficiaries before your death. This could prove extremely tax efficient in terms of Inheritance Tax, as assets gifted away are fully outside of the donor’s estate 7 years after the gift is made.

However, rather than gifting assets absolutely, as this would mean that these assets will again be potentially at risk from other threats such as divorce, creditors and long term care costs, as well as adding value to the recipient’s estate, it could be wise to also consider gifting with the aid of Discretionary Trusts.

Setting up a Discretionary Trust through Templar Estate Planning means that, although you make a Gift to your children and grandchildren, as desired, the asset does not need to enter their own estate, thus protecting these assets from any possible claims or attacks on them in the future.

By gifting to a Trust, the Trust settlor retains full control, however, he or she cannot have access to the funds. Even if he or she having made the gift never received any benefit, but potentially could, the Gift would be classed as “With Reservation of Benefit” and, therefore, the full value is deemed to be in the donor’s estate at death for Inheritance Tax (IHT) purposes, not just the initial Gift.

The Gift Trust ensures that a spouse, children grandchildren and any other named beneficiaries can benefit at the Trustees discretion.

Post Budget 2006, these Gifts are restricted to the Nil Rate Band (plus any unused annual exemptions) for each. Hence for couples up to £650,000 (tax year 2012/13) could be gifted in this fashion. Further chargeable gifts would attract immediate taxation of 20%.

Should both survive 7 years the strategy could be repeated for larger estates.