Trust planning is an estate-planning tool that allows you to effectively manage and protect your wealth, so that it can be safely passed on to the next and future generations.
Whilst there are different types of trusts available, they all have the same purpose in that they detail your specific wishes for an asset. Treated as a separate legal entity, assets including property, cash, shares and investments can be transferred into a trust.
Trust planning involves three key roles:
- The settlor – The person who establishes the trust and transfers assets
- The trustees – The people who oversee and control the trust, which will often include the settlor. A trust is a legal arrangement between the settlor and trustees, and the terms of the trust will be set out in a trust deed
- The beneficiaries – The people who will benefit from the trust arrangement whether that be receiving money, or the right to occupy property, for example
Trust planning can help to provide for your family and can be used as a financial planning tool to pass wealth to future generations efficiently, or to reduce the amount of inheritance tax you have to pay. A trust can also be used as an efficient tool to utilise beneficiaries’ income tax allowances.
A trust allows you to maintain control over the assets you have placed in it, and provides greater security compared to an outright gift, as they can be set up without giving a beneficiary full access to the income or capital.
There are several different types of trust available, which can be set up for different purposes depending on who you want to pass your assets to and when you want your beneficiaries to have access to your assets.
These different types of trusts are all subject to income tax, capital gains tax and inheritance tax in varying ways, as the rates and allowances available depend on the how the beneficiaries of a trust stand to benefit from it.
The most frequently used type of trust is a discretionary trust. In this arrangement the settlor gifts the assets to the trust absolutely, and the trustees have wide-ranging decision-making powers as to how the trust fund is invested and how and when trust funds are distributed to beneficiaries.
How we can help
Trust planning can be complex, with a number of tax and administrative responsibilities involved in the establishment and ongoing structure of a trust, meaning expert advice should always be taken.
Our specialist private client team can work with you to determine the most suitable type of trust for you, depending on your individual circumstances and requirements.