UK: Excluded Property Trusts

UK Non-Domiciliary Planning

What is an Excluded Property Trust (EPT)?

• It is a discretionary trust created by a settlor who is/was non-domiciled at the creation of the trust.
• The settled assets must consist of non-UK situs chattels.

Who would the EPT benefit?

• UK-resident individuals who are non-UK domiciled.
• Non-UK resident individuals who are non-UK domiciled who may take up residence in the UK.

Key Points

• Safeguarding of assets, wealth preservation and succession planning.
• Non-UK domiciliary will become deemed domiciled after residing in the UK for 17 years.
• Mitigate Inheritance Tax (IHT) and liabilities before acquiring deemed-domiciled status by ensuring Non-UK situs assets are settled before 17 years of residence in the UK.
• Settlor can be the protector of the trust and can give ongoing guidance to the trustees.
• The trust provides advantages to beneficiaries over outright gifts being made to them.
• Even if settlor becomes UK-deemed-domiciled the settled assets, settled before the date of deemed domicile, will NEVER form part of settlor's UK estate.
• Avoid the need for Grant of Probate.
• Appoint a class of beneficiaries, such as unborn children and grandchildren.
• Gifts with reservation of benefits do not apply to EPT unlike the relevant property trust.

Why set up an EPT in Gibraltar?

• Cost effective pricing structure when compared to other jurisdictions.
• Speed and efficiency of set up.
• Based on UK common law.
• Regulated by the Gibraltar Financial Services Commission (FSC), trust laws are fully recognised by the Gibraltar Supreme Court, decisions can be appealed to The Privy Council in England.
• The trust is not chargeable to Gibraltar taxation where the settlor and beneficiaries are not resident in Gibraltar.
• Confidentiality on the administration and distribution of assets.
• Perpetuity period is 100 years.

Costings for a Gibraltar trust:

• Short form trust (holds shares in a single underlying company)
  
  

  Initial Establishment	£350
  Annual trustee fee	£500

• Long form trust (multi assets holding)
  
  

  Initial Establishment	£1,500
  Annual trustee fee	£1,500

There will be a charge for the time spent on the transfer of the legal ownership of assets. Ongoing administration, bookkeeping and accounting services will be charged on a time-spent basis.

How this works in practice:

Mr Patel is 25 years old and applying for a golden visa for the UK with the aid of a private wealth lawyer in the UK.

• He is presently Indian-domiciled
• His Indian estate is worth £1,000,000
• His wife has died and he has one son
• He died aged 70

1. If Mr Patel did nothing within 17 years of arrival and died the liability to IHT would be as follows:

Mr Patel's son will have to pay £270,000 to HMRC BEFORE any estate can be distributed to him.

2. If Mr Patel had set up an EPT within 17 years of arrival with non-UK resident trustees and settled, for example, £675,000 and had cash of £325,000 the liability would be as follows:

Mr Patel's son who is UK-domiciled will receive the £325,000 plus any money received from the EPT with no UK IHT to pay. At this stage the EPT can either be wound up or retained.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.