Discretionary Will Trusts: Are They Still Useful?

Some people have concluded that discretionary will trusts no

longer have a place in capital tax planning following the

introduction last October of the transferable nil rate band

(NRB) provisions. Since last October any NRB allowance which is

not used on the first death can be transferred to the surviving

spouse's estate on their subsequent death.

HM Revenue & Customs (HMRC) are steadily reducing

Inheritance Tax (IHT) planning opportunities making it

essential for clients to maximise those reliefs and exemptions

which are still available.

For business clients two of the most important IHT reliefs

are Agricultural Property Relief (APR) and Business Property

Relief (BPR). Provided land satisfies the definition of

"agricultural property" and has been occupied for the

purposes of agriculture for either two or seven years

(depending upon who farms the land), the IHT relief which is

then applicable is 100% of the agricultural value of the

property.

So far as BPR is concerned, 100% relief is available for:

the assets in the business of a sole proprietor or the

interest of a partner in the assets of a partnership.

the unquoted shares or securities of a trading company

controlled by the transferor immediately before the

transfer

the unquoted shares in a company which do not fall within

(2) above and which (either by themselves or together with

other shares or securities) are related property immediately

before the transfer gave more than 25% of the votes

exercisable on all questions affecting the company as a

whole.

50% relief is available for:

a minority holding of unquoted shares in a trading

company

quoted shares in securities of a trading company

controlled by any transferor immediately before the

transfer

any land or building, machinery or plant which,

immediately before the transfer was used wholly or mainly for

the purpose of a business carried on by a company of which

the transferor then had control, or by a partnership of which

he was then a partner

any land or building, machinery or plant which,

immediately before the transfer, was used wholly or mainly by

a trading company for the purpose of a business carried on by

the transferor and was settled property in which he was then

beneficially entitled to an interest in possession.

In the event that you own an asset which will either qualify

for APR or BPR then the discretionary will trust is still a

valuable tax planning tool. If you have a business or farm

which qualifies for BPR/APR then...