TRUST & ESTATES

WHAT IS A TRUST?

A trust is a bit like a company. It pays its own tax, has someone who runs it and people who can benefit from it – beneficiaries. They’re very flexible as the assets can remain in trust, be passed on to the beneficiary at a specific time (such as when they reach a certain age), or it may provide a regular income or even a place to live.

The media and our politicians have given trusts a bad name. They’ve been represented as a method used by the rich to avoid paying tax. Plus, some people see trusts as terribly over-complicated. However, the main reason why you might use a trust is nothing to do with tax. It’s all to do with security and protection. It can help you protect money, property or investments for someone else to benefit from at a later date.

SECURITY AND PROTECTION

Trusts are ultimately created to help a beneficiary or a group of beneficiaries. You might have children or grandchildren who you want some assets to go to, yet you want to add another layer of protection. A trust provides security because it can be set up without giving a beneficiary full access to capital, protecting your estate. This may sound pessimistic. But it means your assets may be safer from future relationship breakdowns or bad financial decisions by the next generation.

THE TAX ADVANTAGES

Trusts are flexible. And there can be huge tax advantages. They can be used to loan money for properties, pay for school fees, provide a regular income and much more. If you’re nervous about passing company shares on to your children, you can do so via a trust instead. And let’s say you sell your business one day, if you receive a lump sum of money, you can make sure this is protected in an efficient way.

THERE ARE A FEW RULES

Of course, there are a few rules to be aware of. A trust can last anything from one day to 125 years. And the maximum you can transfer into a trust is usually only as much as the inheritance rate nil rate band. Currently that stands at £325,000, although if you have assets qualifying for reliefs such as business property relief (e.g. unquoted trading company shares) you can put more than £325,000 into a trust.

If you’re interested, our specialist personal tax team can get you up to speed on the numbers. We’re used to working with families and individuals in both setting up trusts and acting as trustees. And we’ll make sure your assets are structured in the most efficient way possible.