Inheritance Tax (‘IHT') And Trusts – Tips And Traps

Discretionary trusts, whenever created, and most other forms of lifetime trusts (other than bare trusts and qualifying trusts for disabled persons) established on or after 22 March 2006 are subject to what is known as the 'relevant property' regime which imposes a charge to IHT on the capital value of the trust assets on each 10 year anniversary of the creation of the trust and 'exit' charges when capital is distributed or property otherwise ceases to be relevant property.

Over the past couple of years, the Government has been consulting with the stated aim of simplifying this charging regime and at the same time blocking tax planning using multiple trusts. In the end, there is very little in the way of simplification, but there are at least two traps which it is easy for trustees to fall into under the new regime.