BR Guide FINAL 20 Feb

57 CASE STUDIES TRUST? SCENARIO: Grant is in his 80s and widowed. He set up a discretionary trust in 2013; having not transferred any other chargeable assets into trust in the preceding seven years, he gifted a total of £325,000 into trust. DISCRETIONARY TRUSTS Client in his 80s who has already gifted £325K (+annual gift allowances) into a discretionary trust, uses BR to shelter further funds 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 NO GIFTS £325k TRUST £3,000 GIFT £3,000 GIFT £3,000 GIFT (NO CLT) (NO CLT) (NO CLT) (NO CLT) GRANT’S TRANSACTIONS AN INVESTMENT HE MADE FIVE YEARS AGO HAS JUST MATURED AND HE NOW HAS AN ADDITIONAL £300,000 IN HIS ESTATE GRANT WANTS TO GIFT THE £300,000 INTO TRUST BUT HIS ADVISER POINTS OUT THERE WOULD BE A 20% CHARGE* HE INVESTS IN BR ASSETS IN ORDER FOR THE £300,000 TO BENEFIT FROM 100% IHT RELIEF + £300,000 *Any amount over the NRB will be deemed a chargeable lifetime transfer (CLT) subject to immediate charge to IHT. SETS UP A DISCRETIONARY TRUST, NOT HAVING TRANSFERRED ANY OTHER CHARGEABLE ASSETS IN THE LAST SEVEN YEARS £325,000 Total IHT saving £120,000 CASE STUDY 3 SCENARIO: Jimmy owns £600,000 of BR qualifying shares in Smith Technology (held for five years), an unlisted trading company. He and his wife, Wanda, also own a property worth £1.5 million and hold other assets and investments totalling £1,000,000. Their total estate value is £3,100,000. Jimmy dies in mid-2018. DISCRETIONARY TRUSTS BR investment into a discretionary will trust to avoid passing all assets to surviving spouse (and avoid loss of RNRB due to taper threshold) CASE STUDY 4 £1.5m HOUSE VALUE BR Qualifying BR AND SPOUSE EXEMPTION ENSURE THAT THERE IS NO IHT ON JIMMY’S DEATH ON WANDA’S DEATH, SHE LEAVES THE FAMILY HOME TO THE COUPLE’S TWO CHILDREN £600,000 BR QUALIFIYING SHARES INVESTED INTO SMITH TECHNOLOGY £1 million OTHER ASSETS AND INVESTMENTS £3,100,000 TOTAL ESTATE VALUE If Jimmy leaves all his assets to Wanda, his estate will not qualify for the RNRB as he has not left a home to his children or grandchildren (direct descendants). 8 YRS LATER