The 6th Duke of Westminster died on 9 August leaving an estate worth over £9 billion. He owned 190 acres of property in Belgravia and Mayfair and substantial property portfolios all over the world.
His son, Hugh Grosvenor, will inherit the whole estate and will become the 68th wealthiest person in the world.
There have been numerous reports stating that the estate was held in trust and therefore will pass to the son without any inheritance tax being paid. This is unlikely to be entirely correct.
On death, inheritance tax (IHT) is currently charged at 40% on assets over a certain amount (which is £325,000 for a person who is single and £650,000 for a married person).
When spouses leave their estates to each other, the whole estate is exempt from IHT
If property is held in trust, usually the trustees will have to pay lifetime IHT. These payments are charged at 6% of the value of the trust and payments must be made every 10 years at the rate of 6%. The idea behind lifetime IHT rates is that after 70 years the trustees will have paid 42% in lifetime IHT (at 6% every 10 years) and therefore the equivalent of full death rates of IHT are paid roughly once every generation. Pro rata lifetime IHT is also paid if money is paid out of the trust at any time (known as exit charges).
Lifetime IHT was only charged on certain types of trusts until 2006 when the Labour government extended lifetime rates so that they apply to most trusts.
Therefore, assuming that the Duke of Westminster trusts are based in the UK, the trustees will have been making regular IHT payments every 10 years.
The purpose of trusts for landed estates is primarily to safeguard the estate for future generations rather than to save tax. It may be true that there is no large IHT bill on the death of the Duke of Westminster but it is less well known that trustees for landed estates pay regular instalments of IHT every 10 years.