Hello, I am a single parent with a 15 year old daughter living with me. My property is currently valued at £600,000 with a mortgage of £100,000. I have a health issue and I do worry about my daughter losing her home to pay the tax while coping with my death (it may not happen in near future but better be safe than sorry)
I have been given advise to set up a trust to avoid inheritance tax as below.
"Trusts for bereaved minors
A bereaved minor is a person under 18 who has lost at least 1 parent or step-parent. Where a trust is set up for a bereaved minor, there are no Inheritance Tax charges if:
##the assets in the trust are set aside just for bereaved minor
##they become fully entitled to the assets by the age of 18 A trust for a bereaved young person can also be set up as an 18 to 25 trust - the 10-yearly charges don’t apply. However, the main differences are:
##the beneficiary must become fully entitled to the assets in the trust by the age of 25 ##when the beneficiary is aged between 18 and 25, Inheritance Tax exit charges may apply"
Could you please explain what exit charges are?
Please advise on what sort of trust and how it operates, and more importantly the charges that arise, and how they affect the Inheritance tax position.
Thank you for your help.