BR Guide Second Edition

SCENARIO: Betty and Bob are married and in their 70s. Both have adult children from previous marriages and would like their respective children to inherit their individual estates. LIFE INTEREST TRUSTS To prevent the value of assets held in the IPDI trust being aggregated with his wife’s estate on her death, leading to a charge to IHT before the net capital is distributed to his children, the IPDI trust is invested into a BR qualifying investment on Mr Johnson’s death. BR Qualifying ALTERNATIVE ROUTE If Bob invested in BR qualifying assets during his lifetime and directed the investment to the IPDI trust in his will, his wife would only have to survive for the balance of the two-year qualifying period to ensure the capital was outside of the charge to IHT. Both strategies enable the full amount of Betty and Bob’s NRB to be applied against her own estate to protect it for the benefit of her own children. Immediate Post Death Interest trust (IPDI) created by a life interest trust investment to shelter the trust fund from IHT on death of life tenant SET UP OF AN IPDI TRUST TO PROVIDE HIS WIFE WITH AN INCOME DIRECT HIS CAPITAL TO HIS CHILDREN ON WIFE’S DEATH BOB’S WILL CASE STUDY 1 Trust Interactions 59 CASE STUDIES SCENARIO: Simon owns £540,000 of BR qualifying shares in Jones Technology (held for five years), an unlisted trading company. He and his wife, Alexandra, also own a property worth £1.6 million and hold other assets and investments totalling £900,000. Their total estate value is £3,040,000. Simon dies in mid-2020. 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 2 £1.6m HOUSE VALUE BR Qualifying BR AND SPOUSE EXEMPTION ENSURE THAT THERE IS NO IHT ON SIMON’S DEATH ON ALEXANDRA’S DEATH, SHE LEAVES THE FAMILY HOME TO THE COUPLE’S TWO CHILDREN £540,000 BR QUALIFIYING SHARES INVESTED INTO SMITH TECHNOLOGY £900,000 OTHER ASSETS AND INVESTMENTS £3,040,000 TOTAL ESTATE VALUE If Simon leaves all his assets to Alexandra, 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 *If she holds the investment at the time of her death and the total ownership period between her and Bob is at least two years, the trust capital invested will be outside of the charge to IHT.