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Trusts

What is a trust?

A trust is a legal arrangement where you give money, property, or investments to someone else so they can look after them for the benefit of a third person.

So, for example, you could put some of your savings aside in a trust for your children.

There are two important roles in any trust that you should understand before you read on.

  • The trustee is the person who owns the assets in the trust. They have the same powers a person would have to buy, sell and invest their own property. It is the trustees’ job to run the trust and manage the trust property responsibly.
  • The beneficiary is the person who the trust is set up for and is usually unable to manage the trust assets for themselves for whatever reason possibly because they are too young, or they are not good at managing their own money. The assets held in trust are held for the beneficiary’s benefit.

What does a trust do?

If you put assets into a trust then, provided certain conditions are met, they no longer belong to you.

This means that when you die their value normally will not be counted when your Inheritance Tax bill is worked out.

Instead, the cash, investments or property belong to the trust. In other words, once the property is held in trust, it is outside anyone’s estate for inheritance tax purposes.

Another potential advantage is that a trust is a way of keeping control and asset protection for the beneficiary; a trust avoids handing over valuable property, cash, or investment whilst the beneficiaries are relatively young or vulnerable.

The trustees have a legal duty to look after and manage the trust assets for the person who will benefit from the trust in the end.

When you set up a trust you decide the rules about how it is managed. For example, you could say that your children will only get access to their trust when they turn 25.

What type of issues can occur when you die without a trust?

  • Executry/Probate costs can significantly reduce the amount your beneficiaries receive. It can also take a significant time before your estate can be released. Assets in a Trust are not affected by the Executry/Probate process. This greatly reduces the amount to pay in legal costs and the assets can be distributed straight away.
  • Sideways disinheritance. People are increasingly remarrying after their partner has passed. Often, Wills are redone to leave the surviving partner’s estate to their new partner. The new partner can then, effectively disinherit the surviving spouses’ children. Leaving assets through a Trust can avoid this.
  • Children with Problems – sometimes it is not wise to leave a lump sum to a child. If a child inherits through a Trust, that inheritance is protected against:
    • Matrimonial Issues – the inheritance would not be taken into assessment in any divorce
    • Financial problems – creditors cannot lay a claim against the inheritance
    • Disability benefits – Inheritance not taken into account for assessment
    • Alcohol, drugs or gambling problems – sometimes a child needs to be protected for their own good.
    • Legal Rights (in Scotland). Although it is difficult to disinherit children through a Will in Scotland, having your assets in Trust avoids this issue
  • Incapacity – Having a Trust means that there is an extra layer of people who can help you with your affairs. This is a great complement to a Power of Attorney.

What are the key benefits if you die with a trust in place?

Plan and Prosper can provide you with a trust which is designed to protect you and your family’s assets from financial loss during your lifetime.

This will ensure peace of mind knowing that your estate will be passed over to your chosen beneficiaries & relatives after your death.

  • When you die, your estate is distributed immediately – no need for probate.
  • Your children can use the trust to protect their own assets and help reduce inheritance tax.
  • The Will instructions are carried out by Trustees (professional solicitor) acting only in the interest of your wishes.
  • The Will instructions are carried out by Trustees (professional solicitor) acting only in the interest of your wishes.
  • If the Settlor wishes, the Trustees do not have to wait for the Settlor to die to provide assistance to the beneficiaries.  They can see their beneficiaries benefit during their lifetime.
  • Sideways disinheritance is a common occurrence in the event that one of you were to remarry the inheritance would be protected from moving sideways to a new spouse as with second marriages it is possible that inheritance can be passed to another family. This can be avoided with the Asset Protection Trust, as you are in control and can specify who will inherit.

Looking to put a trust in place?

Simply just complete our simple contact form, or give our experienced team of estate planners a call and let us help you.

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