Ellis Bates Financial Advisers
To download your free guide to Placing Assets into a Trust, please fill out your details below:
"*" indicates required fields
You can establish a trust or property protection trust during your lifetime or, through your Will, on your death. You can appoint trustees of your choice (this can include you and your spouse during your lifetimes) who will manage the trust on your behalf. Following your death, the trustees will act with consideration to your wishes.
If you’d like to discuss trusts and protecting your family, please get in touch:
Trusts separate assets’ legal ownership from their beneficial ownership. The legal owner holds the title and is empowered to deal with and administer Trust assets, while the beneficial owner as the name suggests – derives the benefit from them. This could be in terms of usage, income from those assets or sale proceeds.
A person known as the ‘settlor’ places assets into a Trust, which may include money, property or other types of assets like life insurance policies and investment portfolios. This may be done during their lifetime (a Lifetime Trust) or can be triggered by death through a valid Will (a Will Trust). By placing the assets into this structure, the original owner may relinquish some of their rights and delegate responsibility to a trustee during their lifetime.
However, they can gain a lot more control in other ways. A settlor can project their wishes years into the future. Provided a Trust is set up correctly, you can determine who gets what and when with a good deal of precision. Trustees can be professionals (who work for a Trust company) or any other competent person prepared to take on these responsibilities.
Trustees can have very wide-ranging powers and tasks, including settling tax bills and hiring investment management and legal professionals. If the Trust is discretionary, meaning they have discretion regarding the distribution of assets, they might also have to make certain decisions about how to use the Trust income and/or capital.
For these reasons, many prefer to have their Trust administered by professionals, paying them annual fees from the Trust’s assets. However, others looking to structure family wealth may appoint a mixture of professional and family friend trustees to create a balance of objectivity and personal knowledge of the beneficiaries’ situations and needs.
Combining professional expertise with personal familiarity can ensure that both the technical and emotional aspects of Trust management are adequately addressed. Professional trustees bring technical know-how and impartiality, while family friends may offer deeper insight into the beneficiaries’ circumstances.
By thoughtfully selecting trustees, you can achieve effective and empathetic management of your Trust, ensuring that your wishes are fulfilled as intended. A blend of professional and personal trustees can provide a balanced approach, safeguarding the beneficiaries’ financial and personal interests.
Various types of Trust are available, and the settlor needs to decide which type is best suited for the circumstances.
A quick summary of the principal types of Trust is as follows:
Bare/Absolute Trusts – Where the settlor transfers the legal ownership of assets to the trustee for the benefit of the beneficiary absolutely.
Interest in Possession Trusts – The beneficiary (or sometimes known as ‘life tenant’) holds a right to the Trust fund’s income or the right to use Trust assets. The remainderman’s (the person who receives the property after the death of the life tenant) entitlement relates to the underlying capital.
Discretionary Trusts – This arrangement gives trustees flexibility and control over how best to use the Trust assets for the benefit of the beneficiaries. This flexibility helps in situations where children or grandchildren may not yet be born at the time the Trust is set up, as they would therefore automatically be included as a beneficiary.
Note that these are just a few examples; many other types of Trust can be used under different circumstances.
It’ll be of no surprise that one of the main reasons for using Trusts is for tax planning and mitigation. For example, when an individual dies, their estate (i.e., net assets) is subject to Inheritance Tax (IHT), meaning the beneficiaries may lose up to 40% of their net inheritance.
If assets are put into trust during a settlor’s lifetime and they survive seven years, they are not part of the estate on death and may escape IHT at that time subject to the 14-year rule not being invoked. Trusts are used in certain IHT planning arrangements for the settlor’s benefit, such as Gift and Loan plans, Discounted Gift Trusts and Flexible Reversionary Trusts.
Trusts are frequently created in Wills, particularly where the beneficiaries are minor children who need someone to look after them financially. Any asset left to a minor under a Will is effectively held in trust for the minor by the executors until the minor reaches majority unless the Will allows payment to be made to a parent.
Trusts can be explicitly created in Wills to ensure that a beneficiary does not benefit until some other age is attained or a condition is fulfilled. There are many other reasons for setting up Trusts, notable examples being to provide a pension, provide for families, assist a charity, give property to those who legally cannot hold it, and gain protection from creditors and business protection.
Are you looking to optimise your Retirement Planning?
If you require further information or personalised advice on setting up a Trust, please contact us. We’re ready to assist you in navigating the complexities of Trust administration and estate planning.
By taking the proactive step to draft a Will, you can protect your family from uncertainty and potential conflicts, ensuring that your legacy is preserved according to your exact intentions. If you haven’t done so already, now is the time to prioritise this important task and secure the future for those you care about most.
We have produced a factsheet with everything you need to know about drafting a Will, available to download here:
"*" indicates required fields
Discussing finances can evoke anxiety or discomfort, and this tension doesn’t ease when family members are involved..
How can you make financial planning conversations go smoothly?
Discussing who will inherit will help you avoid future disagreements, ensure your Will is up to date and minimise inheritance tax liabilities
Building a succession plan that suits your needs ensures you have laid the firm foundations for your family’s future
It’s possible to gift tax-efficiently during your lifetime using various allowances and exemptions
Discuss where you’ll safely leave basic details of your bank accounts, savings, investments, and utility providers
You can put in place a power of attorney, a legal document enabling you to name one or more people to look after your affairs if you lose capacity
If you would like to discuss your family’s financial future and how we can help, please get in contact
Your financial adviser will have helped you plan a secure retirement lifestyle and naturally your thoughts will now be turning to how you can help your family now and in the future. Your adviser will guide you through key stages including
Your adviser’s role is to ensure you enjoy your retirement and bring expertise into successfully passing on your wealth in the right stages.
If you would like to discuss your and your family’s financial future, please get in touch.
Protecting your legacy and boosting your children’s financial securityDiscussing finances can evoke anxiety or discomfort, and this tension doesn’t ease when family members are involved. Nevertheless, parents of adult children are responsible for discussing their financial future – particularly retirement and estate planning. Doing so ensures their children can provide support or fulfil their wishes as needed.
Open conversations can provide financial planning opportunities and improve your loved one’s future finances. The sooner you talk about money, the better your chances are of protecting your legacy and boosting your children’s financial security.
Let’s begin with inheritance, which is a hugely emotive subject. While discussing who will inherit a portion of your estate after you have passed away might seem difficult, doing so could prevent future difficulties or disagreements.You can explain your plans and why you have made certain decisions. This could also provide an opportunity to consider if your will needs updating. For example, you might need to amend your will to ensure your estate can benefit from the residence nil-rate band, which could reduce your estate’s Inheritance Tax (IHT) bill.
Although you’ll want to avoid giving away money that you might need in the future – towards care costs, for example – you might wish to consider passing on some wealth to future generations within your lifetime. Using pensions,Trusts, and life assurance are just some ways you can do this.This can be complicated, but we can work with you to give you peace of mind that you’ve laid the firmest foundation for your family’s future.
It’s possible to gift tax-efficiently during your lifetime using various allowances and exemptions. For instance, you can give away up to £3,000 per year free from IHT. Additionally, you can make small gifts, such as potentially exempt transfers (PETs), become exempt from IHT if you live for at least a further seven years after making the gift.
Dealing with a deterioration in mental capacity can be particularly tough on your family. If you can no longer make decisions for yourself, you’ll want to ensure someone you trust is legally in this position. You can put in place a power of attorney, a legal document enabling you to name one or more people to look after your affairs if you lose capacity.Without this document, an application must be made to the Court of Protection (the sheriff court in Scotland), which can be a complex, costly, and lengthy process for your loved ones.
Discuss where you’ll safely leave basic details of your bank accounts, savings, investments, and utility providers. Compiling a list of this information is time well spent and could be invaluable to your family if you lose capacity or pass away. Talking to your family about inheritance might seem difficult, but we can help start the conversation and guide your through what may be an emotional process.
Building a succession plan that suits your needs ensures you have laid the firm foundations for your family’s future. It’s crucial to regularly review and update this plan to adapt to any changes in your personal circumstances or legislation. The planning process leads to understanding each family member’s motivations and personal drivers. This will enable you to assess the direction of your vision and the options available to your family to create a plan for your family’s future.
Please contact us for more comprehensive advice on managing your family’s financial future, including estate planning, lifetime gifting, and setting up a power of attorney. We’ll assist you in navigating these challenging discussions and ensuring your financial legacy is secure.
Estate planning is about more than just tax. It is about making sure the people left behind are financially supported, that your assets are protected and that the tax your estate pays is fair.
Wealth preservation and wealth transfer are becoming an increasingly important issue for many families today.
Your estate consists of everything you own. This includes savings, investments, pensions, property, life insurance (not written in an appropriate trust) and personal possessions. Debts and liabilities are subtracted from the total value of all assets
There are various ways to legally avoid paying inheritance tax and we have produced a free Estate Planning guide to support you with Inheritance Tax Planning: Download Here
It is critical to consider the potential consequences of not having a Lasting Power of Attorney (LPA) in place. Many people assume that their loved ones or close relatives will automatically have the authority to make decisions on their behalf. However, this is not the case, and without an LPA, those close to you will not have the legal authority to handle your financial affairs, health decisions and welfare.
Setting up an LPA is vital to ensure that you have a trusted individual who can manage your affairs when you are no longer able to do so yourself. It is essential to think about these scenarios in advance and plan accordingly by setting up an LPA. This legal document will ensure that your wishes are respected and carried out, regardless of your capacity to make sound decisions.
Despite the fact that 95% of UK adults are aware of LPAs, a recent study has revealed that only one in three (33%) actually know how to use it effectively, leaving a considerable proportion at risk of costly and time-consuming measures if they were to lose their spouse [1].
An LPA is a legal document that enables you to delegate decision-making authority to one or more trusted individuals to manage your financial matters, property affairs, health and welfare. You can set up an LPA at any time, provided you meet the age requirement of 18 years and have the mental capacity to make sound decisions.
There are several benefits to having an LPA, including assistance in temporary situations such as hospitalisation or travel abroad, where you may need help with daily tasks like paying bills. It is also beneficial in long-term situations where you want to plan for the unexpected or have been diagnosed with an illness like dementia that may affect your decision-making abilities in the future.
According to the research, although three-quarters (74%) of Britons deem an LPA necessary, only 37% of them have actually put it in place. In contrast, around three-quarters (76%) of people in relationships have discussed Wills and Trusts with their spouse.
The research also highlighted that less than half (41%) of married couples have enacted LPA, and a quarter (24%) have no plans for doing so, which suggests that many couples view this measure as unnecessary, and often mistakenly believe that LPA is automatically granted to married couples.
Notably, this issue disproportionately affects same-sex married couples, where awareness of the importance of LPA is higher than the population average (87% compared to 76%), but uptake is lower (30% compared to 41%).
Do you need advice and expertise on every aspect of your estate? We understand the importance of putting the right planning in place for the future. We’ll help you organise your affairs and plan for the future. To find out more, speak to us today.
Source data: [1] https://adviser.scottishwidows.co.uk/assets/literature/docs/2023-03-power-of-attorney.pdf
Important information: This article does not constitute tax or legal advice and should not be relied upon as such. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. For guidance, seek professional advice. Powers of attorney/will writing and trusts are not regulated by the financial conduct authority.
If you would like to speak to one of our Estate Planning Specialists on making a Will, then please get in touch.