Is it time you considered a Trust?

Published by Simon Levine on 7 February 2022

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Contrary to popular belief, trusts are not exclusive to the super rich. Nowadays trusts are regularly used as an estate planning tool to protect assets in second marriages, from care fees and inheritance tax. Trusts can also be used to provide for vulnerable loved ones and children. Whether you want to create a trust during your lifetime or on your death, it might be time to consider how a trust could benefit you and the process to set one up.

Set your goals

In order to choose the most suitable trust structure you need to make a number of early decisions:

1. What is the purpose of the trust – Do you wish to mitigate your own inheritance tax? Are you looking to pass wealth down the generations? Do you need to provide for a vulnerable person?

2. Will the trust come into effect whilst you are living or upon your death – If you need your assets during your lifetime then it may be advisable to have the trust drawn into your Will instead.

3. Who are the beneficiaries and what are their personal circumstances? If you have concerns over bankruptcy or divorcing beneficiaries this may alter your choice of trust.

4. Who will be your trustees and how much discretion do you want your trustees to have over how the trust is managed and distributed?

5. What assets are you looking to transfer to the trust?

Create the trust agreement and consider any tax implications

Once you have decided the purpose of the trust you will be in a position to choose the right trust structure, often with the help of a legal advisor.

The choice of trust will also impact the tax implications of both setting up the trust and managing the trust going forward. You might weigh up whether a different trust is better suited, or whether you should make changes to the assets being transferred to the trust and expert advice at this point can save you money further down the line.

Once the terms are agreed, the trust can be professionally drawn up for you and your trustees to sign.

Transfer assets, pay any tax and register the trust

You will need to arrange for the trust assets to be transferred to the names of the trustees. If there are properties to transfer this might involve a conveyancer, or the trustees may need to set up a trustee bank account.

If inheritance tax, capital gains tax and/or Stamp Duty Land Tax is due on the transfer of the assets you will need to complete the relevant returns and pay the tax within the set timeframes.

Once your trust is nicely set up your trustees will be responsible for registering it with the Trust Registration Service and noting any deadlines for filing tax returns.

For more information about the topic explored in this article, contact us here.

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