You probably gave the news of the death on Tuesday 9th August 2016 of the 6th Duke of Westminster no more than a passing thought. I imagine the Duke and his family moved in a very different world from you and your family.
The worlds may be very different, but there are more similarities than perhaps you have guessed. After reading this article you may decide you would like to find out a little more about how you and your family could use a similar approach to that used by the Duke and his family.
Immediately following the Duke’s death there was a lot of media attention on whether or not any Inheritance Tax will be paid and, if so, how much. According to The Sun the Duke’s family will “avoid paying billions in Inheritance Tax”, whereas The Financial Times said “the estate … could be landed with a tax bill running into billions of pounds.”
There is some uncertainty about the tax that will eventually be paid. The reason for this uncertainty is that most of the family’s wealth was put in trust by the 5th Duke of Westminster (the 6th Duke’s father). Unlike a Will, a Trust and all the surrounding documentation is not in the public domain. How much tax is due on the estate, if any, is a private matter between the Duke’s family (or, strictly speaking, the Trustees) and HM Revenue and Customs.
What is reasonably certain, however, is that the trust structure, which includes ownership of the massive property group, Grosvenor Group Limited, means much less Inheritance Tax will be paid than would otherwise have been the case.
The reality is that Inheritance Tax is often rightly called a “voluntary” tax. If you do not wish your family to pay too much Inheritance Tax there are many perfectly legal and ethical ways to ensure it is reduced or even disappears altogether. It is not even the case that Inheritance Tax makes that much difference to what the government is able to achieve. I have checked the statistics, and in 2014-15 Inheritance Tax was only 0.6% of total government revenue whereas Income Tax and National Insurance was nearly 43%.
It is also true that if all you want to do is avoid paying Inheritance Tax, setting up a trust may not be the best way of doing so.
If the family are not particularly using the trust structure to avoid paying any tax, then why have such a structure in the first place?
One reason for this I have already given. If you are happy for the whole world to see, on your death, how much money you have passed on and who has received it, then you can simply pass it on using a standard Will. On the other hand, if you take the view that this information is nobody’s business but your own and your family’s, the only way you can keep it completely private is by passing your wealth into a Trust.
Another reason so many wealthy families use Trusts is to protect their wealth from a wide variety of threats and to try to ensure it remains within the family rather than being dissipated, for example, by divorce settlements. Such a structure effectively allows you to continue to control your wealth from beyond the grave in ways that are simply not possible with simply a standard Will – for example, ensuring it all remains within your own blood line.
According to a report in The Telegraph the day after the duke’s death, setting up and maintaining a trust structure like this is prohibitively expensive for all but the wealthiest families. This is simply not true. Any family that can afford the services of a good financial adviser can also afford to set up a trust structure. If you want to give your beneficiaries a similar level of protection to that enjoyed by the Grosvenor family, you can do so very easily and without too high a cost.
We specialize in helping clients understand the benefits Trusts can bring them and then setting up the right trust structure if they decide this is a route they wish to follow. You should note that this article is not a recommendation that you set up a Trust. Nobody can recommend this to you without knowing exactly what you want to achieve. Contact Cadde Wealth Protection on 023 8089 2111 for information on this and to see whether a trust structure is something that you should consider further.