Planning for the future with trust creation

When it comes to estate planning, many of our clients instantly think about wills, which go into effect after you die to distribute your assets as you’ve specified. In addition to who will receive your assets, wills cover a plethora of other aspects such as guardianship of your children and pets, funeral arrangements and specific one-off gifts to loved ones. So where do trusts come in, and why would you need one?

A trust is a legal agreement that arranges the transfer of ownership of a person’s assets to another individual, group or company, controlled by trustees. Suitable for money, investments, property or other assets such as paintings, trusts come into effect as soon as you create them - not just after death. Not just for the “super-rich”, trusts can be a fantastic way to help you to make the most of any allowances and minimise tax in a range of different scenarios.

Trusts can be used to avoid probate, the lengthy process of changing the title on assets when someone passes away. This encompasses a court overseeing administration, ensuring validity and assisting in distributing the property in line with the will’s specifications. Assets that are owned in the name of a trust are immediately accessible by its beneficiaries, eliminating the period during which bills cannot be paid and assets cannot be managed by skipping probate court entirely.

A range of trust types exist to suit many family structures and scenarios, including but not limited to:

A Protective Property Trust (PPT) can help you to protect your home and ensure that it's passed onto your loved ones, allowing them to benefit from your estate after your death without actually inheriting it. Suitable for couples who are concerned that one of them may need long-term care in the future, a PPT protects your home from being included in assessments to determine how much your spouse should pay for their long-term care fees, which can erode wealth and what your children will eventually receive as inheritance.

Trusts for disabled or vulnerable individuals enable the beneficiary to receive reductions in income and capital gains tax, in addition to exemption from inheritance tax in some cases. These trusts help to protect vulnerability and effectively manage the finances of the individual, whilst maintaining access to means-tested benefits and support, such as Attendance Allowance, Disability Living Allowance (DLA) or Personal Independence Payment (PIP).

A Family Protection Trust operates like a safety deposit box, in which you place your house and any other property, financial assets and investments. Whilst still maintaining the right to move or sell your property, or invest as you normally would, a Family Protection Trust allows for minimisation of inheritance tax, assists with eligibility for means-tested benefits or care fees, eliminates probate, and allows you to decide when your beneficiaries inherit, at the right time. Sideways disinheritance is also prevented, so your children are guaranteed their inheritance without your assets passing to a stranger if your surviving spouse was to remarry.

A Flexible Life Interest Trust, also known as Interest in Possession or IIP Trusts, is a trust where a beneficiary is left a lifetime interest in relation to a property, a share in property or an entire estate. Because the capital in the trust is not owned by the surviving spouse or partner, it cannot be given away to a new spouse or partner, and is not assessed for means-tested long-term care fees. Only after the death of the partner, would the income and capital of the assets pass onto other beneficiaries of the trust, such as your children. This trust type differs from a normal Life Interest Trust in that the trustees have the option to lend or give some of the capital from the assets to the surviving partner, rather than just the income from the assets.

How can we help?

When creating a trust, it's essential to receive competent professional advice to comply with a number of complex but strict conditions. At Angell Mallinder, we're experienced in creating and administering a wide variety of trust types, scenarios and applications, with the knowledge and experience you'll need to find the right trust, for you. We will help you:

Get in touch today to speak to the Angell Mallinder team

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