Inheritance Tax in the Financial Times this week when Mark Davies helps to answer a reader’s concern over protecting their children’s savings…
Trusts for Bereaved Minors
Mark urges parents to seek professional advice to write a will and appoint guardians in the event of premature death. It is possible to put assets into a trust known as “a trust for bereaved minors”. This means that all or part of the estate can be exempt as long as funds are distributed to children when they reach 18 years old.
Life Insurance and Investment Bonds
Mark also recommends taking out Life Insurance or Investment bonds, which can be held in trust for children. These are outside the scope of Inheritance Tax if they meet certain conditions.
The 7 Year Rule
If assets are gifted a full 7 years before a parent’s death then they will be exempt from Inheritance Tax although there may be some Capital Gains Tax Liabilities. The gift must be a genuine gift. For example, parents cannot give away their house to their children but continue to live in it.