Trusts

Writing a Will

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Statistics show that 22% of adults aged 75 years and above have no will, along with 39% aged between 65 and 74.

Having a Will in place is essential to ensure your estate is passed down to who you want it to. If you would like more information and guidance on making a Will, please get in touch.

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Wills and Inheritance Tax

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Wealth transfer has become an important issue for many families today. Individuals with assets of any size should prepare for their eventual transfer whilst making provision for any tax or legal consequences.

But more than half of parents (57%) haven’t spoken to their adult children about their Will, according to new research[1]. Nearly a quarter (24%) of adults haven’t discussed making a Will with their partner or spouse, while almost a third (31%) were unsure if they understood the long-term benefits of putting their assets into a trust or finalising a Will.

Long-term finances

The survey also revealed one in two (49%) adults admit that talking about long-term finances, especially in the event of death, with family members is difficult. When it comes to discussing Wills and trusts with adult children or dependents, over two-thirds (69%) of parents say they feel responsible for the financial wellbeing of their children if they were to pass away.

Despite this, 57% admitted they haven’t talked to their children about long-term finances, while nearly one in ten (9%) parents said they weren’t sure how to approach the topic. The survey finds 47% of people have their children down as a beneficiary of their Will – higher than other forms of support, such as a deposit for a house or flat (19%), a savings pot with regular contributions (16%), or covering the cost of transport, such as a car (15%).

Minimal Inheritance Tax

Parents and guardians should make formal arrangements so that, upon their death, the appropriate plans are in place to ensure the people they wish to benefit from their estate will do so, with the estate settled as quickly as possible and with minimal Inheritance Tax.

If there is no Will, the deceased’s estate will be distributed under the terms of law, which may not align with their loved one’s wishes. Receiving the right professional advice and setting up a financial plan can ensure you are best able to look after your family when the time comes.

Giving peace of mind

With so many different options, it can be overwhelming. The research found that two-thirds of adults (69%) understand the long-term benefits of finalising trusts and Wills, but that still leaves many who don’t.

It’s important to have plans in place to protect your assets and loved ones, today and in the future. It might be difficult to think about, but it ensures your wishes will be met, giving you peace of mind. The outcome of not having a Will or trust in place can be costly – so knowing the difference between Wills and trusts, and putting them in place appropriately, can provide vital benefits.

Wealth and assets

When looking to leave assets to family members, Inheritance Tax is a key consideration. Effective estate planning can help in ensuring your wealth and assets go to your loved ones. By setting up a trust you can effectively put the money outside of your estate, which could be efficient for Inheritance Tax purposes.

Assets held within a trust do not usually form part of your estate upon death, provided that you live for seven years after placing the assets into trust. Therefore, it’s likely they won’t be liable to Inheritance Tax.

Understanding the options

Effective estate preservation planning could save a family a potential Inheritance Tax bill amounting to hundreds of thousands of pounds. Inheritance Tax planning has become more important than ever, following the government’s decision to freeze the £325,000 lifetime exemption until April 2028, with inflation eroding its value every year and subjecting more families to Inheritance Tax.

Over half of Britons (57%) believe it’s important to seek financial advice when it comes to long-term financial planning, which is absolutely right. Seeking advice from a professional ensures you fully understand the options available, and recommendations are made in line with your requirements, giving you peace of mind.

Inheritance tax planning services

Are you looking to pass on more of your wealth in the most tax-efficient way? We all have different objectives in life and need different strategies to help achieve them. We can help you build a strategy that provides financial support to your family and helps you pass on more of your wealth in the most tax-efficient way – please get in touch with us for more information on our estate planning and inheritance tax planning services.

Source data: [1] The research was conducted by Opinium Research and surveyed 2,000 UK adults between September 5-13, 2022.

Important Information: Inheritance Tax planning is a highly complex area of financial planning. Information provided and any opinions expressed are for general guidance only and not personal to your circumstances, nor are intended to provide specific advice. Professional financial advice should be obtained before taking any action. Inheritance Tax planning is a highly complex area of financial planning. The financial conduct authority does not regulate Inheritance Tax planning.

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Benefits of setting up a trust

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Trusts have many benefits such as enabling you to pass your assets directly to your chosen beneficiaries. To start your estate planning journey, please get in touch.

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Setting up a trust

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A trust is a way to place assets in the hands of a trusted third party to hold for the benefit of others. Mark Chandler, Head of Estate Planning, explains what a trust is, when to establish one and what the benefits are.

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Types of trusts

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What is a trust?

You may want to consider putting some of your assets into a trust for a loved one. Trusts are a way of managing wealth, money, investments, land or property, for you, your family or anyone else you’d like to benefit.

Bare Trust

Bare Trusts are also known as ‘Absolute’ or ‘Fixed Interest Trusts’, and there can be subtle differences.

The settlor – the person creating the trust – makes a gift into the trust which is held for the benefit of a specified beneficiary. If the trust is for more than one beneficiary, each person’s share of the trust fund must be specified. For lump sum investments, after allowing for any available annual exemptions, the balance of the gift is a potentially exempt transfer for Inheritance Tax purposes. As long as the settlor survives for seven years from the date of the gift, it falls outside their estate.

The trust fund falls into the beneficiary’s Inheritance Tax estate from the date of the initial gift. With Loan Trusts, there isn’t any initial gift – the trust is created with a loan instead. And with Discounted

Gift plans, as long as the settlor is fully underwritten at the outset, the value of the initial gift is reduced by the value of the settlor’s retained rights.

Discretionary Trust

With a Discretionary Trust, the settlor makes a gift into trust, and the trustees hold the trust fund for a wide class of potential beneficiaries. This is known as ‘settled’ or ‘relevant’ property. For lump sum investments, the initial gift is a chargeable lifetime transfer for Inheritance Tax purposes.

It’s possible to use any available annual exemptions. If the total non-exempt amount gifted is greater than the settlor’s available ‘nil-rate band’ (NRB), there’s an immediate Inheritance Tax charge at the 20% lifetime rate – or effectively 25% if the settlor pays the tax.

Flexible Trusts with default beneficiaries

Flexible Trusts are similar to a fully Discretionary Trust, except that alongside a wide class of potential beneficiaries, there must be at least one named default beneficiary. Flexible Trusts with default beneficiaries set up in the settlor’s lifetime from 22 March 2006 onwards are treated in exactly the same way as Discretionary Trusts for Inheritance Tax purposes.

Different Inheritance Tax rules apply to older Trusts set up by 21 March 2006 that meet specified criteria and some Will Trusts. All post-21 March 2006 lifetime trusts of this type are taxed in the same way as fully Discretionary Trusts for Inheritance Tax and Capital Gains Tax purposes.

Split Trust

These trusts are often used for family protection policies with critical illness or terminal illness benefits in addition to life cover. Split Trusts can be Bare Trusts, Discretionary Trusts or Flexible Trusts with default beneficiaries. When using this type of trust, the settlor/ life assured carves out the right to receive any critical illness or terminal illness benefit from the outset, so there aren’t any gift with reservation issues.

In the event of a claim, the provider normally pays any policy benefits to the trustees, who must then pay any carved-out entitlements to the life assured and use any other proceeds to benefit the trust beneficiaries.

Property Protection Will Trust

This is a type of Life Interest Trust and is incorporated into a Will for couples who jointly own the family home.

You can protect at least half of the value of the property by having it ring fenced in a trust so you can pass it onto your children or chosen beneficiaries when you pass away, whilst at the same time protecting the surviving partner’s lifetime interest in the property.

Right of Residence Trust (ROR)

This a form of Immediate Post-Death Interest Trust incorporated into a Will. This trust allows you to give a chosen beneficiary a right to reside in a specified property either for their lifetime or for a specific time period.

Start your estate planning journey

Estate preservation and the transferring of wealth has become an important issue for many families today. We all have different objectives in life and need different strategies to help achieve them. That’s why carefully planning the financial affairs of your estate is essential to ensure that you can pass on the maximum benefit to your beneficiaries, which can have a significant impact on your loved ones’ futures.

Contact us to discuss how our Inheritance Tax planning services can help you start your estate planning journey.

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Property Protection Trusts

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You can establish a trust during your lifetime 0r; 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.

Trusts offer several benefits:

  • On your death, the trust asset can pass to your chosen beneficiaries with no need for probate
  • In certain circumstances, trusts can protect your assets from creditors
  • You can control who benefits from your assets during your lifetime and on your death
  • Depending on how the trust is structured, it is possible to invest your assets into a trust to mitigate inheritance tax, income tax, and capital gains tax (principle private residence relief)
  • Protect your estate against potential future care fees

You may also wish to reserve some influence over your assets for the trustees to observe after your death.

For example:

  • You may want to delay the age at which beneficiaries inherit
  • You may want your heirs to receive their inheritance in stages
  • You may be concerned about your heirs getting divorced and want to protect the assets inherited from you being included in a divorce settlement

Trusts can also be useful in preventing assets reaching a beneficiary facing insolvency proceedings and those making poor lifestyle choices, such as involvement in alcohol and drugs.

Property Protection Trust

Owning your home as tenants in common rather than joint tenants provide additional planning opportunities. This can potentially protect inheritance in terms of residential care fee assessment and marriage following bereavement.

A property protection trust is put in place so that the half share of the family home belonging to the first person to die passes into the trust (also known as a life interest trust). This allows the surviving spouse to benefit from the share of the house during their lifetime. Following the surviving spouse’s death, the property can then be passed on to either children or loved ones. By putting this trust in place, you are ensuring your assets are going exactly where you want them to go and giving you total peace of mind.

The benefits of a property protection trust are:

  • Each spouse now owns 50% of the property
  • Each spouse grants the surviving spouse a ‘right to reside’
  • Allows you to pass your property to your chosen beneficiaries
  • Each spouse can gift their 50% as they see fit: (both halves of the property do not have to go to the same beneficiaries)
  • Allows you to nominate your chosen Executo1·s/ Trustees to handle the property on your behalf
  • Can be used as a tool for planning for care home fees

Please be aware that should the survivor remarry, not make a new will and then die, intestacy rules would see the new spouse taking a disproportionate amount of the estate. By severing the tenancy and creating a life interest trust in your wills (for the surviving spouse), this means your assets are going exactly where you want them to go and giving you total peace of mind. To preserve the residential nil rate band, property needs to pass to direct descendants.

Get in touch

For more guidance on the benefits of setting up a property protection trust and for more information on our inheritance tax planning services, please get in touch with us.

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Tax Planning Services

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Head of Estate Planning and Chartered Financial Planner, Mark Chandler, outlines our tax planning services including making a Will, trusts and probate.

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Benefits of a trust

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Trusts can help you with:

  • Protecting Assets
  • Flexibility
  • Tax Efficiencies

Trusts terms:

  • Settlor – the person setting up the trust
  • Trustees – the people tasked with looking after the trust and paying out its assets
  • Beneficiaries – the people who benefits from the assets held in trust
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Creating a trust

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Mark Chandler, Head of Estate Planning talks about trusts, what they are, when to establish one and what the benefits are.

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What is a trust?

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‘Ring-fencing’ assets to protect family wealth for future generations.

You may want to consider putting some of your assets into a trust for a loved one. Trusts are a way of managing wealth, money, investments, land or property, for you, your family or anyone else you’d like to benefit. You may want to consider putting some of your assets into a trust for a loved one.

Trusts are a way of managing wealth, money, investments, land or property, for you, your family or anyone else you’d like to benefit. They are used to protect family wealth for future generations, reducing the intergenerational flow of Inheritance Tax and ensuring family protection for your estate from outside claims.

The way in which assets held within trusts are treated for Inheritance Tax purposes depends on whether the choice of beneficiaries is fixed or discretionary.

There are lots of different types of trust and some will allow you to ‘ring-fence’ the money or property so that it sits outside of your estate when you die.

The most popular types of trust commonly used for Inheritance Tax planning can usually be written on either an ‘absolute’ or a ‘discretionary’ basis and the taxation treatment is very different for each. A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Once the trust has been created, a person can use it to ring-fence assets.

Trusts terms:

  • Settlor – the person setting up the trust.
  • Trustees – the people tasked with looking after the trust and paying out its assets.
  • Beneficiaries – the people who benefit from the assets held in trust.

Trusts are a complicated area and can be expensive to set up. Some are subject to other tax regimes, so you should get authorised and regulated specialist advice. Book a chat with us for further information and guidance on trusts.

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