Expert advice on winding up trust saves family £91,000 in tax
We advised a family on the winding up of an old style "interest in possession" trust for the life tenant's inheritance tax planning purposes. However, the winding up of the trust would have created a significant capital gain and therefore triggered a substantial Capital Gains Tax liability. We therefore recommended that part of the value, up to the life tenant's nil rate band, was advanced to a discretionary trust. This allowed Capital Gains Tax Holdover Relief to be claimed on the transfer into the trust. Shortly after, the assets were advanced out of the trust, again claiming Holdover Relief. This allowed the assets to pass into the hands of several beneficiaries who each had their own Capital Gains Tax annual allowance, which eradicated the tax liability on the distribution of that section of the original trust fund. This resulted in tax saving of some £91,000.