All parents worry about their children, and you might be starting to think about what would happen to them if you pass away. Depending on your situation, you may worry that your children won’t have enough money or resources to take care of themselves if you’re no longer here. Fortunately, you can set up a trust that ensures the people you love the most will receive the care they need long after you’re gone, and you can rest assured that our professionals will help you set up the most appropriate discretionary trust for your needs.
Establishing a Trust in your Will can be beneficial for lessening Inheritance Tax (IHT) and ensuring that children are not disinherited by changes to marital status.
Trusts can be written to come into force immediately, or can be effected upon your death if written into your Will. They can vary from being a simple clause in a Will that protects assets for a child until they reach a certain age, to a more complex Trust that cares for a disabled child who may not be able to manage their own affairs.
Below is an explanation of two common Trust types:
Lifetime Interest Trusts
A Lifetime Interest Trust (also called a Family Asset Protection Trust), effectively gives over ownership of specific assets to a Trust that you control and benefit from while you are alive (so you could receive interest and dividend payments for example, and buy or sell assets themselves).
If you die first, your partner could continue to benefit from the assets – in exactly the same way that they could continue to live in the family home under a PPT. Upon their death, the Trust and its contents pass down to your chosen beneficiaries as you have stipulated.
Particularly helpful for unmarried couples who cannot benefit from any unused inheritance tax allowance upon the first partner’s death, a Discretionary Trust sees assets, including property, transferred and managed by trustees (who usually include any surviving spouse and other beneficiary) who decide how those assets are to be used and distributed.
Despite needing to pay inheritance tax on the first partner’s half of the estate, thousands of pounds can still be saved perfectly legally in this way, as both partners’ IHT allowances are maximised for the benefit of their chosen beneficiaries.
A Discretionary Trust is also a fantastic tool for avoiding sideways disinheritance and for providing for people with disabilities.
There are many other types of trust, for example, Trusts for the Disabled, Pilot Trusts, Bare Trusts, Business Property Relief Trusts, these can all be discussed with you, depending on what is relevant to your circumstances A trust may well be worth considering to protect your family or business from third party interests and to ensure that funds end up in the intended place. However, careful consideration must be given to potential tax liabilities and any legal or other restrictions that may apply. We can offer simple, straightforward guidance on these options.