How Trusts Help Reduce Inheritance Tax

Inheritance tax (IHT) can take a large chunk of an estate. Trusts help reduce IHT and protect assets for future generations. In the UK, the standard IHT rate is 40% on estates above £325,000.
Discretionary trusts, bare trusts, and interest-in-possession trusts are great tools.
- Discretionary trusts allow assets to be excluded from the estate if the settlor survives seven years.
- Bare trusts work the same way, with beneficiaries having a direct claim to assets.
- Interest in possession trusts let beneficiaries receive income while preserving the principal.
Using trusts also offers asset protection, controlled distribution, and tax efficiency. They can reduce IHT and provide for vulnerable beneficiaries without losing government benefits.