Gift Trust Quiz

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Gift Trust Quiz

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Mr Jones is widowed and has an estate value of £1,250,000. He was predeceased by a spouse who left everything to him and so he has the fully transferrable allowances, has children and a main residence worth £500,000, he will therefore be able to maximise the allowances on his death.He is looking to gift £400,000 away in order to reduce his estate for Inheritance Tax purposes and he has made no previous gifts.

Amongst the assets he is looking to give away, is a rental property worth £300,000, which was purchased for £150,000 and has always been rented out and the rental income is no longer required by Mr Jones. Further, there has been no substantial amounts of money put towards the improvement of this property.

In addition to this, he is looking to give away £100,000 in cash that he has and would like this to pass via a discretionary trust but does not wish to pay any tax immediately as a result of the gift.

Which of the following statements is true: *

6 points

1. Mr Jones could transfer all of the assets into a gift trust without there being an immediate charge to IHT

2. Due to the combined gift of £400,000, there would be an immediate entry charge for IHT purposes on the excess over and above the nil rate band.

3. There would not be a charge to CGT on the transfer of the property into a gift trust, as this is not a sale.

4. There will be CGT to consider on the transfer of cash into the Family Gift Trust.

5. The property transfer is deemed a disposal and as such, the transfer of the property would be a disposal for CGT purposes, triggering a capital gains tax charge which could be held over (deferred) depending on the trust used.

6. The Family Holdover Gift Trust would be required for the gift of the property, if the gain is to be held over (deferred) until a later date.

7. The rental property could be transferred into the holdover gift trust, with the balance up to the nil rate band, being made up with cash. Any excess over and above that could be loaned to the trust to avoid an immediate charge.

8. The loaning of funds into the gift trust would also be deemed a chargeable lifetime transfer

9. Provided 7 years has passed from the gift, the amount gifted would be outside of the estate for IHT purposes.

10. A gift of £325,000 subject to Mr Jones surviving 7 years from the gift would be sufficient based on today’s numbers, to ensure that his current IHT liability could be removed.

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