Product Estate Planning Excluded Property Trust 680X392

Excluded Property Trust

Shelter your overseas assets from inheritance tax

Helen’s story

Keep access to your savings and reduce inheritance tax

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About Helen                 

Helen is currently non-UK domiciled but she is a UK resident. She was born in France and has lived in the UK for the past 14 years. She’s not married, does not own a property and has an estate worth £1m most of which is outside the UK. She wants to leave this to her children who have grown up in the UK and are UK domiciled.

 Helen’s goals

If Helen remains in the UK she’ll be deemed UK-domiciled for inheritance tax purposes. This happens when she has been resident for 15 out of 20 years and after that point inheritance tax will be payable on her worldwide assets.

If Helen dies, the first £325,000 of her estate is free of tax because of the nil rate band. The remaining £675,000 of her £1m estate will be taxed at 40%. This means Helen’s inheritance tax bill will be £270,000 and she wants to put some of her estate in trust to help avoid this. 

Choosing our Excluded Property Trust

Helen’s adviser suggests that she invests in an international investment bond and gifts this to an Excluded Property Trust. Once she sets up this trust, the money in the trust will be sheltered from UK inheritance tax.

Flexible withdrawals

The trustees can make payments to a beneficiary, including Helen, at any time. As the money is held in an investment bond the trustees can also use the tax deferred allowance to provide regular withdrawals from the trust.

Inheritance tax planning for her children

With the Excluded Property Trust, Helen’s children should not have to pay any UK inheritance on the assets inside it. Her children, who are UK domiciled, can also receive money from the trust as and when they need it should the trustees decide. Any money that remains in the trust when the children die will also be free of UK inheritance tax on their estate.

What are the risks?

The value of your investment can go down as well as up and you may get back less than you invest. The way investments performed in the past is not a guide to how they’ll perform in the future.

Tax rules depend on individual circumstances and may change. Speak to an adviser, if you need more information on tax.

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