Trusts and their administration are a diverse and often misunderstood area of law, which when used correctly, can provide real benefit to the lives of all involved. There are many ways that different types of trusts can be used and some of these reasons are as follows:
Protect Family Wealth
You may wish to gift your estate to the next generation but are worried about what would happen if the beneficiaries became divorced or bankrupt, as the asset given forms part of their estate. By placing these funds into trust, you would be protecting the funds against this eventuality and potentially also retain an element of control over the gift, thereby ensuring that your wealth provides for multiple generations.
Providing for a vulnerable or disabled person
You may wish to make a gift or provide for someone who would not be able to manage these funds themselves, for example someone with a mental incapacity or other problems such as drink, drugs or gambling addictions. By placing the funds which you wish to be used for their maintenance into trust, you would be making sure that these funds would be used in an appropriate way as decided by your chosen trustees in order to look after the beneficiary for their lifetime, or as needed.
To place the funds in Trust, is also a way to ensure that any means tested benefits that the beneficiary is entitled to would not be affected by a sudden lump sum gift.
You may wish to make a gift to children to be given to them after your death, however they may be too young or financially immature to receive these gifts outright. In this circumstance, many of our clients create a trust which instructs at what age the child would be able to access their gift.
Inheritance Tax Planning
If you have assets that qualify for business property relief or agricultural property relief, trusts can be a useful way of allowing effective control without the inheritance tax implications, as the assets would then qualify for inheritance tax relief.
Splitting the benefit of an asset
You may wish to grant the benefit of an asset to one beneficiary, but intend for the asset to eventually pass to another beneficiary e.g. give your widow the right to live in the marital home until they pass, upon which time, you would like your share of the property to go to your children. This can be achieved by creating a trust.
It is also worth noting that in 2017 HMRC created the Trust Registration Service (TRS) and required that all taxable relevant Trusts be registered on this service and regularly maintained by trustees. Earlier this year the rules changed however and now all relevant trusts need to be register on the TRS, unless specifically excluded by September 2022.
For more information on any of the above or if you have any other questions regarding Trusts, please feel free to contact us – Philip Whitcomb
Find out who is in the Moore Barlow Wills, Trusts and Estates team.