What is a Business Property Relief Trust?
A Business Property Relief Trust (BPR) deals with qualifying assets left in a Will, ring-fencing them from Inheritance Tax (IHT) and Capital Gains Tax (CGT).
It is a Discretionary Trust (DT) that takes assets that qualify for BPR and places them into a Trust.
Why use a Business Property Relief Trust?
If a business owns property or AIM-traded shares, the passing of these assets in a Will can cause serious tax implications for the beneficiary.
The assets will be subject to Inheritance Tax (IHT) rules and/or Capital Gains Tax (CGT). Both of which are easily mitigated by passing these assets in a Trust. The Trust will be set up in favour of the Will beneficiaries, but will not form part of the deceased’s estate and as such will not be subject to taxation.
If the spouse is still living, a letter of wishes is normally written to state that the spouse should be considered as the main beneficiary of the trust. The letter of wishes could order that the trust be wound up and assets dispersed to the beneficiaries upon their death, or it could continue to operate if any of the beneficiaries’ assets need to be protected.
The normal benefits of a Discretionary Trust are also afforded, so protection for any beneficiaries is continued.