Putting your assets or wealth in a trust is a way to guarantee that your loved ones have financial stability for their future. They can help reduce your estate’s exposure to Inheritance Tax and pass on your money, shares and equity in the most efficient way.
They can also provide protection for individuals who may have a disability, learning difficulties or financial issues that they cannot control.
Trusts are often used if you are worried about the impact of third party claims, the divorce of a child or the protection of vulnerable members of your family. There are a few types of trust, designed for different situations.
A Protective Will Property Trust is designed to protect people who are joint owners of a property. It means your partner can live in the property for life after you have passed away. One of the appealing elements of this kind of trust is that, if there are any third party claims upon your partner’s assets, your share of the property can’t be used to settle any claim or liability.
This kind of trust also lets joint owners be more flexible with their share of the property – they can pass it on to someone other than the other owner. This can be useful if your partner remarries or gifts their share to someone else. Your share is still fully protected for the people you want it to go to.
With a Discretionary Will Trust, you put some or all of your estate into a trust, to be passed on to your named beneficiaries by people you appoint as trustees.
It’s a good and flexible way to leave assets to future generations. One of the main reasons that people set up a Discretionary Will Trust is to protect your assets from being lost to third party claims or future government decisions.
You set out the general rules your Trustees should follow in making decisions about how to pass on your wealth. This can be useful if your children or other beneficiaries are on welfare benefits, are disabled or have a history of financial problems.
This approach also makes sure that wealth stays within your family – for example, it can’t be included in your child’s divorce settlement.
Discretionary trusts are a very common in Will writing. Our client Kenneth wanted to make sure that his children would keep their inheritance, and it couldn’t be lost to their partners should they ever divorce in future. Read Kenneth’s full story
There are three key roles within a trust – the settlor, the trustees and the beneficiaries.
The settlor is the person who establishes and puts assets into the trust. Settlors are usually individuals or couples.
The trustees are the people who control and oversee the trust. Anybody can act as a trustee as long as they are over 18 and have full mental capacity. Often the settlor will act as a trustee to keep an element of control over the trust.
The beneficiaries are the people who benefit from the arrangement. They might receive money from the trust or the right to occupy a property. Certain trusts give the trustees discretion over how and when these benefits are given to beneficiaries.
Different types of trust are subject to Income Tax, Capital Gains Tax and Inheritance Tax in different ways. The rates and allowances vary according to the type of trust and how the beneficiaries stand to benefit from it. This is a complex area, so you should seek specific advice from an independent adviser about your specific situation. HoneyPro does not provide tax advice.
