A trust can be a simple, effective way of distributing money and assets to your beneficiaries after your death. It also allows you to defer payments until a later date, such as when they reach a specific age, rather than paying them straight away. It can also help you be more tax-efficient in the distribution of your assets.
Our specialist team advises clients in different languages on a wide range of legal matters. Call them on 0208 1111 911 or contact them through the website to discuss your circumstances with them.
What exactly is a Trust?
A trust is a fund that sits outside of an estate, from which money can be paid to beneficiaries. It can be set up while you are still alive, or you can specify in your will that a trust will be created after your death. Either way, you will need to decide who to appoint as trustees. These will need to be people you have a very high level of trust in.
A benefit of a trust is that you can defer payments to beneficiaries rather than them receiving a lump sum on your death. Many people are attracted to trusts because they see them as being tax-efficient in terms of Inheritance Tax. In reality, they can be tax-efficient if they are managed properly, but sometimes not to the extent that people expect.
Tax is typically payable at the point of setting up a trust, to discourage people from using them solely to reduce their tax bill. If you set up a trust with the sole intention of reducing Inheritance Tax, it may not be as effective as you thought. However, there are other ways that trusts can benefit you and your beneficiaries.
How do I benefit from a Trust?
Parts of your estate may be left immediately and in full, to a beneficiary. However, there are some circumstances where you may wish to defer the transfer of an asset to your beneficiaries. Examples might include:
- Leaving assets to children currently under 18 – These beneficiaries can’t legally inherit until they are 18, so assets would be owned by the trust until they reach that age. You may also wish to stage further payments throughout their life – for example a further payment at age 21, rather than a full lump sum.
- Paying education fees beyond your death – If you have children or grandchildren at fee-paying schools, or likely to study at university, you can arrange for these to be paid at the appropriate times through the trust.
- Paying care fees for vulnerable loved ones – If you are responsible for care fees for your spouse, partner or anyone else the trust can continue to pay these fees until their death.
- Replacing your income – If your spouse or partner depends on your income, you can provide them with an income from the trust from your death, for the remainder of their life.
- Allowing others to benefit without ownership – You may wish to leave your property to your children but you may be remarried or cohabiting with a new partner. You could transfer your property to the trust, allowing your partner to live there until their death, at which point the trustees would sell the property and transfer the proceeds to your children.
What other legal advice might I need?
When it comes to planning your estate and distributing your assets to your loved ones, it is best to take a holistic approach and look at all your wishes before and after your death and cover all eventualities.
We recommend that Trusts are used alongside our Will Writing service, to ensure consistency between the two. If you have any assets or beneficiaries in other countries, you might also need to consider an International Will to include those.
You should also consider planning ahead for loss of mental capacity in later years. A Lasting Power of Attorney helps you do this by nominating trusted individuals to make decisions on your behalf if you lack the mental capacity to make such decisions in the future.
How do I get legal advice on Trusts?
Call us on 0208 1111 911 or contact us through the website and we’ll arrange a time to discuss your circumstances thoroughly with you. The initial call is free and we’ll advise you of our fees before you decide whether or not to instruct us.