Trusts are a secure and legal way to keep family wealth intact and ensure it is passed from generation to generation.
Inheritance tax is currently set at 40% once the threshold is reached, but since the country’s largest fortunes are held in trusts this type of taxation only made up a modest £4.7bn of the HMRC’s total collected tax figure of £523bn last year.
The impact a well-managed trust can have an a family’s wealth can clearly be seen from the late Hugh Grosvenor’s estate, which is valued at around £9bn. Rather than paying approximately £3.6bn in taxes and going through lengthy probate processes, the family’s accumulated wealth will be largely kept intact thanks to the way that the 3 Grosvenor portfolios have been managed.
Rather than being taxed upon inheritance, the trusts are subject to charges of up to 6% every 10 years. Agricultural and business properties also have some relief from charge, and the Grosvenor estate was set up to make the most of this loophole.
Properties in the Grosvenor Trust
The trust that manages Grosvenor’s private properties holds around £11.8bn in assets, including 500 acres of land in Mayfair and Belgravia, office space in Silicon Valley, a science part in Edinburgh, and Eaton Square near Buckingham Palace.
This trust is run as a separate legal entity, with its own Chief Executive, and paid £58m in tax on its profits of £527m last year. Broken down, these taxes include property transaction taxes, annual property taxes, and corporate income tax. The charges depend on the use of each property; a rental is an investment rather than a trading company, whereas a hotel is a business.
Trusts for All Britons
While the Grosvenor family assets are exceptional, trusts are not just the preserve of the wealthy. As property prices increase, many families in the UK will find themselves having to pay inheritance tax where they previously would not have met the threshold.
If you would like to find out more about putting properties or other assets into trusts, please get in touch to discuss your circumstances and options.