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Be prepared

01 March 2016 / Paul Thompson
Issue: 4540 / Categories: Comment & Analysis , Admin

The charges that arise on discretionary trusts.

KEY POINTS

  • The changes made in March 2006 have had little impact to date.
  • Relevant property trusts are likely to suffer periodic charges every tenth anniversary.
  • Effect of the nil rate band being frozen.
  • Reporting limits may be breached depending on composition of the trust.

Ten years ago significant changes were made to the way most trusts are treated for the purposes of inheritance tax. With some exceptions such as bare or absolute trusts those created on or after 22 March 2006 are treated as relevant property trusts (RPTs).

Although the RPT regime had existed for many years its application was restricted to discretionary trusts from which no beneficiary had a right to any income generated from the trust capital. Until this change most trusts created...

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