Countrywise, Relevant Property Taxation

What is a relevant property trust?

‘Relevant Property’ refers to the tax position of the trust
Any trust that you transfer assets into during your lifetime, with the exception of a bare/absolute or vulnerable persons trust will be a relevant property trust
In addition, any trust that you leave assets to via a will which is not a bereaved minor’s trust (i.e. setup for children of the testator to inherit at 18) or a qualifying interest in possession trust, will be a relevant property trust.

Apply where more than the available nil rate band is settled into the trust on the amount exceeding the allowance
An entry charge rate is half of the death rate, i.e. 20%
Ensure no more than the available nil rate band is ‘gifted’ into the trust
That means if you want to give away more than the nil rate band, you could loan the balance
Any growth in the trust will be immediately outside of the settlor’s estate for IHT purposes

Applicable every tenth anniversary
Tax charge is 6% of the excess over and above the available nil rate band in the trust
If you are going to gift close to the available nil rate band, use multiple trusts
This means, settle trusts on different days and then assets into then on different days
The net effect is each of those trusts will have a full nil rate band, meaning effective mitigation from this issue

Potentially apply when assets are absolutely appointed out of the trust
Provided you follow the mitigation points for entry & periodic charges, there won’t be an exit charge
In short, there is only an exit charge, if there has been either an entry charge or a periodic charge
These apply on assets coming out of the trust absolutely, which is generally against our best advice in any event!

It is possible to appoint & mandate the income to a beneficiary
This means that the beneficiaries own rates apply
The growing capital value of what could be a rental property would remain in the trust and protected, outside of the beneficiary’s estate