“I think you should set up a trust; this will protect your assets.” Sounds great! But what is a trust? What can you put in to a trust? And will there be any charges associated with the trust?
What is a Trust?
A trust is when one person is given property to hold for the benefit of another. Dependent upon the size and complexity of your estate, particularly if your assets are over the threshold for Inheritance Tax (currently £325,000), you may wish to consider putting a trust in place in order to protect your assets and allow for appropriate estate planning.
Setting up a trust allows you to direct certain assets to specified beneficiaries and gives you peace of mind that your estate is organised according to your wishes.
There are different types of trust suitable for different situations, including:
- Liferent trusts
- Discretionary trusts
- Charitable trusts
Not only can trusts be established for tax efficient purposes and to protect your assets from Inheritance Tax for example, there are many other reasons why people choose to set up trusts, such as to protect against division of assets on divorce and to protect assets for those who are disabled.
Who is Involved in the Trust Process?
There are three main parties involved in the establishment of a trust:-
- The settlor – this is the person who establishes the trust and decides which assets are to be held by the trust;
- The trustees – these are the people who hold the trust property for the benefit of the specified beneficiaries; and
- The beneficiaries – these are the people who will benefit from the assets held in the trust.
Why are Trusts Created?
Trusts are created for many different purposes. However, the most common are to have the ability to pass on assets to children or grandchildren at a time you deem appropriate and/or ensuring that assets do not pass outside of the immediate family. More often than not, trusts are used as part of financial planning to protect family wealth.
It is, however, important to bear in mind that there are certain charges applicable to trusts, particularly if assets held are over the Inheritance Tax threshold of £325,000. Dependent on the type of trust, there can be charges levied whenever money is paid out of the trust and, in some cases, on each 10 year anniversary of the trust.
Here at TC Young, not only can we assist you in establishing a trust, we can also take care of the general administration of the trust. Should you wish to discuss your own situation, please do not hesitate to contact a member of our Private Client team who would be more than happy to assist you.