Using a trust to avoid capital gains tax & inheritance tax

A trust can be very effective in reducing inheritance tax ('IHT') and avoiding capital gains tax. Anyone with assets that are standing at a gain and are looking to reduce IHT could therefore use a trust arrangement effectively. Most new trusts established will be relevant property trusts and as such will be subject to the IHT regime for discretionary trusts. This means that holdover relief can be obtained on any transfers into and out of the trust. This can therefore avoid CGT. You'd need to ensure the property was not to be occupied as a main residence though and also that the trust was not for the benefit of a spouse or minor child. The transfer to the trust would need to be less than the available nil rate band. Assuming no previous transfers a married couple could therefore transfer assets worth £636K into the trust (also taking account of the IHT annual exemption). This could be repeated after 7 years. There would be an IHT tax charge in the trust after 10 years but this would be much less than if the assets were held personally. This could be a useful option for investment property.