New Trusts To Help Mitigate UK Inheritance Tax

by Carla Johnson, Investors Offshore.com

31 August 2006

Friends Provident International (FPI) has launched two new trusts designed to help individuals to mitigate UK inheritance tax (IHT).

Both trusts are written on an absolute, or bare, trust basis and are designed to avoid the new, complex tax regime, which was extended to most lifetime settlements by the Finance Act 2006.

The Absolute Discounted Gift Trust is designed for individuals who wish to reduce IHT liability upon their death, while continuing to receive an income from their investments.

The Absolute Loan Trust is designed for investors who wish to reduce IHT liability upon their death, while still retaining access to the original capital.

Key features for both trusts include:

• The ability to carve out entitlement to a series of capital payments, while reducing the value of an estate for IHT purposes
• No liability to the initial, 10 yearly or exit charges to IHT that have been introduced for flexible trusts
• No need to complete the IHT 100 form on creation of the trust
• A simple and straightforward IHT planning solution.

"The Finance Act 2006 introduced a complex IHT regime that will apply to those who make substantial gifts to lifetime flexible trusts," comments Brendan Harper, technical services manager at FPI.

"The new FPI Trusts are unaffected by these rules, and are therefore suitable for clients who wish to mitigate IHT on larger lump sums, or who wish to keep their planning as simple as possible. The new plans will sit alongside the existing flexible versions, therefore allowing advisers to recommend the most suitable strategy for individual client needs," explained Harper.

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