Page 13 - Finance North - E State Planning Service

Terminology

Flexible Family Trust

A Discretionary Trust that legally holds the Estate after death and where your

chosen Trustees carry out your wishes as outlined in the Memorandum of Wishes.

This is an informal note to the Trustees explaining how you want the Trust
administered and states who you would wish to benefit and when.

Interest in Possession Trust

For a married couple with an estate value in excess of two ‘Nil Rate Bands’, the

recommendation would be to use: - A Family Trust or two Trusts for assets up to the

Nil Rate Band (as per the last section); and - A Family Interest in Possession (IIP)

Trust for the excess. As the ‘income Beneficiary’ of the IIP Trust would be each

other, so the spouse for the other’s Trust, this allows the IIP Trust to benefit from
‘Spousal Exemption’ – thereby ensuring that following the first of you to die, there

would be no IHT to pay

Family Business Trust

Establishing Family Business Trusts to receive business assets on death is the

most protective and tax efficient means of dealing with such assets. ‘Business

Assets’ are those that meet the HMRC criteria for 100% Business Property Relief

(BPR) for Inheritance Tax. That is, at the date of death, the value of the business

assets would be relieved of being subject to any Inheritance Tax. The protection
afforded by Business Property Trusts is similar to Flexible Family Trusts above.

Family Probate Preservation Plus Trust (PPPT)

The PPPT is used where you wish to pass all or part of your Main Residence to be

controlled and managed by Trustees whilst you are still alive. This requires a full

Conveyance transferring the asset to the Trustees. The fundamental feature of the
PPPT is that you are one of the ‘Potential beneficiaries’ and so can continue to live

in the property as you wish, and therefore protecting the property from any

potential creditors while you are alive, and ensuring the property passes to your

chosen beneficiaries.
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