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JGM, Solicitor
Category: Scots Law
Satisfied Customers: 11262
Experience:  30 years as a practising solicitor.
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Myself and my husband have assetts of about £400,000. We have

Customer Question

Myself and my husband have assetts of about £400,000. We have 4 children and would prefer the taxman claimed no more of our assetts than we have paid him already. My brother in England has set up a discretionary trust. Is there an equivalent in Scotland? How do we avoid the taxman getting his hands on what we have worked hard to acquire. Both myself and my husband work full time and pay tax on every penny of what we have ever earned.
Submitted: 4 years ago.
Category: Scots Law
Expert:  JGM replied 4 years ago.
Thank you for your question.

You can make a discretionary trust in Scotland. The taxation rules are the same.

Here is the HMRC link:

I don't think you need to, however.

This is because, assuming you are leaving your respective estates to each other, there is no inheritance tax in the event of the first death. No inheritance tax is payable where the estate is left to a spouse. On the second death inheritance tax used to be payable on the extent of the estate which exceeded the threshold which is currently £325000. So the tax would have been 40% of £75000.

BUT, the important point now is that you can carry forward the £325000 allowance which arose on the death of the first spouse. Putting that together with the other spouse's entitlement gives a total threshold of £650000 which would mean that if the second spouse died with £400000 of assets, no inheritance tax would be payable as you would be well under the limit.

This now makes discretionary trusts unnecessary where spouses between them have assets of £650000 or less.

Again here is the HMRC link on transferring the threshold from one spouse to another:

Happy to discuss further.

I hope this helps. Please leave a positive response so that I am credited for my time.