Will trust for 9 year old grandson

by **Doe** on Mon Mar 21, 2011 6:18 pm

If I leave a half share of my estate to my grandson who is 9 on him reaching 24 I understand the money will have to be classed as held for him in trust until he is 24. My estate currently means that the size of the legacy will be about £300,000.

My problem is I just can't work out what sort of trust this would be and therefore how it would be taxed if I died tomorrow, say. Would it get taxed from him being 9 to when he is 24 and would it be a relevant property trust with a charge to pay when the money is put in the trust and 10 yearly charges?

Please help.

Thank you.

Mike

by **Lee Young** on Mon Mar 21, 2011 6:47 pm

It would be what is known as a "18-25 trust" with the potential for an IHT charge when he reaches the age of 24 at a maximum rate of 3.6% . Simplistically provided the amount in the trust starts out under the nil rate band threshhold there will be no IHT to pay when your son reaches the age of 24. Therefore on £300,000 there should be no IHT.

On a £600,000 estate there may well be IHT to pay when you die unless you have a spouse exemption to use or a transferable nil rate band.

by **Doe** on Tue Mar 22, 2011 11:15 am

Thanks for the response. My wife left me her entire estate so I think I can do what you said.

It is actually my grandson not my son who is to have that share of my estate. Does the same thing apply?

The other half is going to my surviving son directly and then to his young children if he dies before me so I think that share will follow the same rules if my second son (god forbid) goes before me and the children have that share too.

Sorry for the extra questions but I woudl be grateful to know.

Thanks

Mike

by **Lee Young** on Tue Mar 22, 2011 1:42 pm

Apologies - as it is your grandson then the trust will in fact be a "relevant property trust", but virtually the same tax principles apply. From the point of your death the trust could bear IHT every 10 years at a maximum of 6% and IHT at the same rate every time assets leave the trust. Again however if below the threshold for IHT (currently £325,000) then no tax at least in the first 10 years.