Today’s Times (13 October) carries the headline “Duke of Westminster’s £8bn fortune escapes death duties”.

It’s reported that, on the face of the probate just granted in respect of the late Duke’s estate, personal wealth of £616 million was, for the most part, left on life interest trusts for his widow, Natalia.

Assets left direct to, or in trust for, a widow are inheritance tax free by reason of the “spouse exemption”, but the Revenue will claim its 40% tax when Natalia dies. In leaving his estate in trust for his wife, the Duke is no different to millions of other husbands across the land that, while not as wealthy, have left their estate to their wife, or in trust for her, for exactly the same practical, emotional and tax reasons.

The Times intimates that the rest of the Duke’s purported wealth of £8.3billion is held in family trusts and that such trusts allow wealthy families “to pass assets on outside the sphere of inheritance tax”; I have to question that assertion. It’s a common misconception that trusts are some sort of tax-saving wonder-weapon. In truth, most trusts are (and always have been) created for reasons wholly unconnected with tax – to secure property where potential recipients either can’t (because they’re minor children perhaps) or can’t be trusted to have property vested in them outright.

Trust and trustees are firmly with the UK tax net; indeed, in many cases, giving property to, or keeping assets in, a trust can prove singularly tax-expensive.

So far as inheritance tax, specifically, is concerned, assets held in trust may well be spared a charge to inheritance tax on the death of any beneficiary. But there’s a charge to inheritance tax at 6% on the value of assets in the trust every ten years. A rationale for the introduction of the “tenth anniversary charge” back in the 1970s was that, ultimately, the total tax collected during the lifetime of the trust would equate to the one-off tax bill on the death of each successive head of the family. And some tax commentators describe this 6% charge as “punitive” given that lifetime gifts to a trust also attract an upfront Inheritance charge at 20%.

The current Duke, Hugh Grosvenor, is aged just 26. With the likelihood of him living another 60 years, collecting 6% every 10 years as opposed to 40% on his death, doesn’t seem like a bad deal for HMRC (having healthy revenues from the trust long in advance of the Duke’s death). But nor is it all bad for the Duke and his family in terms of the ability to manage the tax liability over a number of years, at fixed points during the life of the trust, rather than being caught unawares by an untimely death and immediate liability to tax at 40%.

And the Grosvenor estate itself, quoted in the Times article, confirms that while the family trusts were designed “to maintain continuity of ownership”, it came at a cost of 6% every ten years: sound financial management, perhaps, rather than the exploitation of any loophole?