Since the changes in inheritance tax brought about by the Finance Act 2006, trusts have been the subject of much debate. Many claimed that the changes would spell the end of trusts but our view is that trusts still have much to offer, particularly in relation to succession planning and the saving of inheritance tax ("IHT").
What is a trust?
A trust arises where assets are transferred by one party to other individuals ("the trustees") to hold for the benefit of others ("the beneficiaries"). A trust can be set up during your lifetime or in your Will.
Why set up a trust in my lifetime?
There are various types of trust and we can advise on which is the most appropriate to your circumstances. One or more of the following may apply to you:
- Succession planning - you may wish to pass shares in a family company to your children, but feel they lack business experience or that the shares will be at risk. A trust allows you to take advantage of reliefs for "qualifying" business assets and benefit your children, whilst retaining control as a trustee.
- Estate and tax planning - you may wish to pass monies or property down to children or grandchildren, but consider that they are not yet ready to hold the assets in their own right. By using a trust, you can provide for them and begin the process of passing assets out of your estate for IHT purposes, but retain control as a trustee.
- Pension planning - you may wish to provide for lump sum pension death benefits to be paid into what is commonly called a "By-Pass Trust". This can minimise IHT whilst still allowing your spouse or other family members to benefit.
- If compensation is received as a result of an injury suffered, means tested benefits can be preserved by placing these monies into a special Personal Injury Trust.
Why set up a trust in my Will?
Even with the recent changes to IHT, there are still good reasons for including a trust in your Will, such as: - providing for a person during his or her lifetime, but ultimately benefiting someone else when that first person dies or remarries - e.g. preserving assets for children on a second marriage;
- making provisions for minor or disabled beneficiaries;
- making use of available reliefs for business or agricultural property.
Existing trusts
Talk to us if: - you have an existing trust that hasn't been reviewed since the changes to the IHT regime or which you would like to consider bringing it to an end, or
- you are a trustee requiring advice on your duties and responsibilities or a beneficiary requiring advice on your position.
If any of these are of interest, we would be pleased to advise you further. Please contact our Private client team on the number above. Alternatively please complete our online enquiry form.
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