Estate planning post

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Estate planning post Finance Act 2006 Richard
Frimston TEP Rose Phelps TEP Chris Young
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• OVERVIEW
• Refreshing the Memory - Trusts Pre-2006
• Existing Trusts Post-2006
• Will Trusts
• The Future

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• TRUSTS PRE-2006
• Life Interest Trusts
• Accumulation Maintenance Trusts
• Discretionary Trusts
• Revertor to Settlor Trusts
• Trusts for Disabled Persons
• Protective Trusts

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• EXISTING TRUSTS POST-2006
• Life Interest Trusts
• No immediate or ongoing IHT charges whilst pre
  22 March 2006 Life Interest continues.
• Pre 22 March 2006 IHT/CGT treatment continues
  if
• another beneficiary takes a Transitional Serial
  Interest (TSI) before 6 April 2008 or
• the surviving spouse (civil partner) takes a TSI
  on death.
• TSIs may result in a PET by the Life Tenant so
  beware GWROB rules.

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• EXISTING TRUSTS POST-2006
• Accumulation Maintenance Trusts
• In most cases you have until 6 April 2008 to
  alter the trust to come within the new regime
• If a beneficiary obtains an IIP between 22 March
  2006 and 5 April 2008 then that share of the
  trust will immediately enter the Relevant
  Property Regime.
• As from 6 April 2008 old AM rules will apply
  only if
• beneficiaries become absolutely entitled to
  capital no later than at 18 years of age
• the trust is converted in to a trust for 18 to
  25 year old. At age 25 a beneficiary would
  become absolutely entitled to their share of the
  capital, income and any accumulated income.

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• EXISTING TRUSTS POST-2006
• (AM Trusts) Trusts for 18 to 25 year olds
• Expressly in relation to post-FA2006 Will Trusts
  but can also apply to existing AMs.
• Beneficiary must become absolutely entitled at
  age 25.
• When converting you will have to fix the share
  which each beneficiary will be entitled to.
• Will only enter the Relevant Property Regime
  from age 18 with a max 4.2 IHT exit charge
  (based on beneficiary becoming absolutely
  entitled at 25)

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• EXISTING TRUSTS POST-2006
• Accumulation Maintenance Trusts
• If no action is taken then trust will enter the
  Relevant Property Regime on 6 April 2008.
• No immediate charge but will be subject to Ten
  Year Charges and Exit Charges going forward.
• First Ten Year Charge will be first Ten Year
  Anniversary based on creation date of the
  original AM.

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• EXISTING TRUSTS POST-2006
• Revertor to Settlor
• Simple absolute reversions largely unaffected
• Reversion in to IIP for settlor will now enter
  RPR on death of life tenant
• Loss of CGT uplift

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• EXISTING TRUSTS POST-2006
• Trusts for Disabled Persons
• Existing Trusts for Disabled Persons largely
  unaffected.
• From 22 March 2006 you can have new trusts for
  Disabled Persons which will be taxed under the
  Old Rules for IHT and CGT.
• Self-Settlement is possible in contemplation of
  becoming disabled.

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• EXISTING TRUSTS POST-2006
• Protective Trusts
• IHT treatment of pre 22 March 2006 trusts is
  unchanged by FA2006 (even if s.33 TA1925
  protective element is triggered, old rules apply
  and IIP treatment remains despite s.33
  discretionary format)
• Post 22 March 2006 Protective Trusts will need
  to comply with new regime to protect their status
  (I.e must be a TSI or IPDI)

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• WILL TRUSTS POST FA2006
• Trusts for Bereaved Minors
• Trust for 18 to 25 year olds
• Immediate Post-Death Interests
• Trusts for Disabled Persons

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Main options available for the Will of a
Spouse/Civil Partner post Finance Act 2006
DECEASEDS ESTATE
Possible devolution of assets
Absolute to Surviving Spouse
Summary of IHT Regime
Gift of Nil-Rate Band
IPDI for surviving Spouse/CP
Trust for Bereaved Minor
Full Discretionary Trust
Trust for 18 to 25 Year Olds
Absolute Entitlement
IPDI for children
Subject to RPR
Outside the RPR until 18
Outside the RPR
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• NEW TRUSTS POST-2006
• IIP or Discretionary?
• Other tax considerations
• Income Tax
• CGT considerations
• Holdover Relief much more widely available - but
  cannot hold-over in to settlor-interested trust
  which now includes Dependent (step)children
• No CGT uplift on death of Life Tenant in
  post-2006 IIPs (unless TSI / IPDI rules apply)

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• THE FUTURE
• Agricultural/Business Property Relief
• Regular nil rate band Trusts
• Bare Trusts
• Non-Trust IHT exemptions
• Further amendments to IHT?

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• ACTION POINTS
• Review Your Will
• Review existing Trust structures
• AM Trusts - retain or amend?
• IIPs - take advantage of Transitional reliefs?

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CONTACTS www.russell-cooke.co.uk Richard
Frimston 020 8394 6217 David Biddle 020 8394
6233 Rose Phelps 020 8394 6238 Chris Young 020
8394 6221
8 Bedford RowLondonWC1R 4BX020 7405 65662
Putney HillPutneyLondonSW15 6AB020 8789
9111Bishop's Palace HouseKingston-upon-ThamesS
urreyKT1 1QN020 8546 6111