In spite of being reported as the 68th richest man in the world it is said that no inheritance tax will be paid on his £9 billion fortune.
If accurate this could be because the assets are held in trust.
The principles of primogeniture mean that the title and estate passes to the eldest son. We are sure that the older daughters might feel a little aggrieved by this but we are equally sure that they are well looked after.
The benefit of this principle means that large estates are preserved, rather than being repeatedly divided equally between all children. Again, we would question whether this is properly described as a benefit, but the position can be compared to that in France where many large estates were divided up and large chateaux fell into ruin following the Code de Napoleon.
Preserving large estates will be difficult if they have to be sold off in order to pay inheritance tax. This is where useful tax mitigation measures are put into play, including the assets being held by a trust, rather than individuals personally. Trustees administer the trust assets for the benefit of beneficiaries, often with specified restrictions on how trust assets and income can be used.
None of us like paying tax and many of us may be thinking whether it is worth investing in a trust. Here are some points to think about;
- There will be annual costs of administering a trust including accountants, solicitors and trustees. The administration of a modest trust of £250,000, from a legal standpoint, would be around £500.00 per annum. Setting up the trust, around £1000.
- Once you’ve put assets into a trust you will find it difficult to extract them.
- There will be tax to pay through the trust.
- The trust can be useful for protecting wealth for future generations and also specifying how it might be spent. For example, it could be stipulated that the income be used to advance and develop beneficiaries including school and university fees (as opposed to fast cars and yachts).
- Assets held in a trust would also help protect family wealth in the event of divorce within the family.
- Is it worthwhile? Any surplus assets that are not needed but over which you would like control to be maintained can be placed in a trust. Trusts of £325,000 or less, are free from inheritance tax.
If you would like to discuss the setting up or administration of a trust, please contact us and ask to speak to our private client team, or email info@newtons.co.uk