If you were advised to take out a discretionary trust as part of your will to minimise your inheritance tax liability as part of your estate planning then you should be aware that since the introduction of the transferrable nil rate band in 2007, these trusts are no longer deemed necessary and it may make more financial sense to close your trust.
In the past, if a will included a discretionary trust, this meant that the first spouse’s nil rate band was placed into trust. Now however, with the transferrable nil rate band, as a married couple you can transfer the amount of inheritance tax free allowance between each other. This means that after you both die, your joint estate may have the benefit of two tax free allowances.
If a discretionary trust remains in place, then it will need to be closed between three months and two years after your death, which can attract a substantial cost – much more so than if the will is simply redrafted whilst you are still alive.
There may also be the possibility that if your spouse lives at least another twenty years after your death, more tax will be payable on the final estate than there would be if the trust is closed now.
Contact the team at IWC Ltd who will be able to advise you of the best way to prepare for your discretionary trust to be closed.