Trusts can be a very effective method of safeguarding your assets and ensuring that the people and causes that you support can benefit from your help.

TP Legal offers expert advice in plain language to make sure that you are able to use all the possible benefits of using a trust.

Trusts can create a basis of estate planning often providing extremely tax-efficient means of safeguarding your assets from future expenses such as residential care home costs or Inheritance Tax.

There are several benefits of setting up a Trust, including:

• Safeguarding assets
• Lowering Inheritance Tax charges
• Safeguarding the assets for minors
• Permitting you to make gifts while keeping control of the assets
• Safeguarding your assets from residential care home fees
• Establishing tax efficient inheritance for your children
• Safeguarding against business failure
• Safeguarding against division of assets in the event of separation or divorce
• Safeguarding the assets of disabled people or people with less capacity
• Protecting personal injury compensation.

What is a Trust?

A trust is an agreement where trustees hold assets for the benefit of one or more ‘beneficiaries’.

Different types of Trusts

There are several types of trusts but the most often used is the Discretionary Trust.

• If assets are given to a discretionary trust and the person who made the gift survives 7 years when they die, the gift does not form part of their Estate for Inheritance Tax purposes.
• Generally gifts to a discretionary trust are not subject to Capital Gains Tax.

Why should I set up a Trust?

Succession Planning

Succession Planning is where a trust is used to give shares in a family business or family company to children or other relatives. A trusts makes it possible to take use reliefs for “qualifying” business assets.

Estate and Tax Planning

Trusts can allow people who wish to pass assets down to younger relatives. A Trust allows the beneficiaries who are not yet ready to hold those assets in their own right to benefit from these assets. A trust allows an individual to provide for your children or grandchildren and start the procedure of making gifts out of your estate for inheritance tax purposes, but keep control as a trustee.

By-Pass Trust

A By-Pass Trust allows a person to pass lump sum pension death benefits to relatives. This can reduce the Inheritance Tax charge whilst still allowing the spouse or other family members to benefit.

Personal Injury Trust

If compensation is awarded due to a personal injury, the person who received the compensation can put this money into a special Personal Injury Trust allowing means tested benefits to be preserved.

Will Trusts

It is vital to think about the tax implications of your death may have, especially for your chosen beneficiaries. It is also vital to think about the best method of arranging how your assets pass down to your beneficiaries, so one or more of the following may apply:

• Provide for a particular individual during their lifetime, but with the estate (or specified asset) ultimately passing to someone else when that first person dies or remarries
• Make provision for disabled people or minors
• To allow flexibility and decisions to be made regarding your estate taken into the circumstances at the time of your death
• Consider a Discretionary Trust to safeguard assets for children on second marriage and also “ring fence” assets when the possibility of nursing home care fees should be considered

Trust law is a complicated area of law and one in which you should always take specialist advice from one of our trust solicitors.

Does your existing trust need a review?

Many trusts were set up several years ago may no longer fulfil their original objectives.

• Do you already have a trust in place, but have not reviewed it since the changes to the inheritance tax regime or would like to consider winding up the Trust?
• Are you a trustee and need advice on your duties and responsibilities?
• Are you a beneficiary of a trust and would like advice as regards your rights?
• In recent years new legislation and regulations have reduced the effectiveness and benefit of trusts, however they may still be relevant when it comes to your Estate Planning.