Protect your assets by making a Trust

When you die, your hard-earned assets could fall into the hands of people you don’t know. Whether that’s a new spouse for a partner you leave behind, long lost family members coming to claim their share, or even the taxman, everyone wants a piece of the treasure you worked so hard to stow away.

Making a Trust helps you protect your treasure from greedy hands, by only giving the key to people you trust.

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Why do I need a trust?

A trust is like a treasure chest of your assets that you store away for safekeeping. This allows you to control who has access, and safeguards your money, your property, and other valuables from the wrong people. Many people don’t understand the rules of inheritance until it’s too late, resulting in the loss of large portions of your estate.

Without a trust, everything you’ve worked so hard for could fall into the wrong hands, allowing the taxman or a greedy family member access to your estate.

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Future estates could be taxed up to 40% if they go over the threshold.

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In 2019, the government gained £3.49 Billion in inheritance tax from people’s estates.

What are the main threats to my assets?

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Tax Charges

Leaving your estate in a will means it will then form part of the assets belonging to the beneficiaries. This will then impact inheritance of future generations, as when your beneficiaries pass, their estate will likely be pushed over the tax threshold as the total value has been combined with yours. In the long run, the authorities can get access to your capital, business or property even after you’ve died through future inheritance taxes.

By placing them into a trust, these assets then exist outside of your beneficiaries assets, as they don’t have ownership of them. This protects the tax-free allowance on their estate when they die, so they pass on the benefit.

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Inheritance Laws

Leaving your assets to your loved ones in a will isn’t enough to ensure control over your assets in the long term. If your partner remarries after your death, this can end up disqualifying your children from inheriting anything you’ve left behind. This is known as sideways inheritance.

Setting out your wishes in a trust ensures your children inherit what is rightly theirs, whatever might occur. This is because the assets within the trust will be protected from the standard lines of inheritance and prevents anyone else from having the ability to leave your estate to someone you wouldn’t like it to pass to.

Watch the video to find out who the biggest threats to your assets are…

How can a trust help me protect my assets?

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Restrict access to your assets to who you choose to have it

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Enjoy your privacy – trusts aren’t public documents, unlike wills

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Save on inheritance tax – don’t let your loved ones lose out

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Provide better financial support for your dependants’ futures

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Give your loved ones quicker access to their inheritance when you’re gone

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Gain better flexibility over how your assets are managed in the long-term

The trusts we offer are an optional addition to our bespoke will service. Click here to find out more about bespoke wills.

How does a trust work?

A trust allows you to split the ownership of your assets in the way you see fit. Think of it as a treasure chest which you can fill with money, property and other valuables. By placing them in the chest, you can control who access, by only giving the key to someone you trust.

There are three main roles in the functioning of a trust. Keep in mind that all parties involved in the trust do not have to be exclusive in their roles.

The Settlor

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Deposits their assets in the chest for safekeeping, and appoints the people who will guard it.

The Trustee

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Guards the chest, and follows the guidelines outlined in the trust by the Settlor.

The Beneficiary

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Is allowed to access the chest, and benefit from the assets when the guidelines allow.

Watch the video to see how a trust could help you protect your assets…

Which type of trust best suits your needs?

Will Trust

Create a trust within your will, which allows you to protect assets you hope to pass on to your family.

 

Discretionary Trust

Allow your trustees to distribute all or part of your estate as and when they see fit.

 
Will Trust

Pass your assets onto your loved ones

With a Will Trust, you are able to place your percentage of any property into a trust should you die before your partner. This will allow your partner to continue living in your home after you die. It will also discount your assets from any assessments made on your partner’s situation, as they would still only legally own their part of the house.

By leaving your assets in a trust within your will, you can ensure that you can support your loved ones when they need it most, by allowing them to access their inheritance without any problems or delay.

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If you leave your property in a trust in your will, this can create a right to occupy for someone who survives you who you name as a beneficiary of the trust in your will. This can help avoid large taxes to be paid on the property.

The trusts we offer are an optional addition to our bespoke will service. Click here to find out more about bespoke wills.

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If you leave your property in a trust in your will, this can create a right to occupy for someone who survives you who you name as a beneficiary of the trust in your will. This can help avoid large taxes to be paid on the property.

Discretionary Trust

Unsure how you want to distribute your assets?

A Discretionary Trust allows you to place assets in a trust for your loved ones to benefit from, even if you’re not entirely sure how you’d like to distribute those assets when the time comes. These can be useful if you have a growing family, or children who may not yet be old enough to manage funds themselves.

The terms of a Discretionary Trust empowers your Trustees, by giving them discretion to allocate your assets to your chosen Beneficiaries as they see fit. It’s vital to appoint a person you trust to manage your assets in your absence, so you can be sure your assets will be distributed fairly whatever the circumstances.

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Although ultimate control over the trust is given to the trustee, you can create a Letter Of Wishes to accompany the document. This gives guidance to your appointed trustees on how you would like the funds to be handled on your behalf, though it is not legally binding.

The trusts we offer are an optional addition to our bespoke will service. Click here to find out more about bespoke wills.

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Although ultimate control over the trust is given to the trustee, you can create a Letter Of Wishes to accompany the document. This gives guidance to your appointed trustees on how you would like the funds to be handled on your behalf, though it is not legally binding.

Who can I appoint as a Trustee?

It’s imperative that, no matter which type of trust you’re creating, you have responsible and reliable trustees to carry out your wishes. All Trustees (and there can be more than one per Trust) must meet the following criteria:

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They must be at least 18 years of age.

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They can be a family member, friend or professional acting on your behalf.

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If you are creating a trust which will be effective whilst you’re alive, you can be the trustee.

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You must be confident that they have the best interests of the beneficiaries at heart.

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It’s preferable to name at least 2 trustees, but a maximum of 4. Make sure there’s unlikely to be any tension between the parties and that roles are clearly set out.

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If you’d rather have someone outside of your family be a trustee, you can appoint a professional such as a solicitor, trust company or accountant.

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They will need to fully understand the responsibility of managing the trust on your behalf.

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It’s a good idea to name successor trustees, to replace a trustee should anything happen to them.

In what situations might I want a Trust?

A trust can include any wishes about how your estate should be handled by the trustee, and you are able to express more complex wishes in how you would like your estate to be manages.

Case One

Heather and Mark have 2 young children. Heather is lucky enough to be very comfortable thanks to her career, and wants to ensure that she is able to finance important aspects of her children’s futures, including money for studies, driving lessons and helping them get onto the property ladder when the time comes.

Heather later finds out that she is ill, and her concerns for her children’s future come to a head. She’s worried that, when she dies, all of her assets will be automatically passed to Mark and become part of his estate. As they are only a young couple, Alice is sure that there’s a chance that Mark may re-marry. This in turn would mean that all of the money that Heather had saved for her children could end up being passed directly to someone else in the future, effectively disinheriting her children from the line of inheritance.

How would a trust help Heather?

If Heather places the portion of her assets she’s set aside for her children into a trust, this prevents it from becoming part of her estate which will automatically pass to Mark under the UK’s rule of intestacy. Whether Mark marries again or not, the money in the trust will only ever be accessible to the children and they will get to benefit from it as Heather originally intended.

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Case Two

Derek is a widower and has 2 grown up children. He is writing his will in order to ensure that his children receive what he wishes them to after he dies, including property he owns and a share of his capital. However, one of Derek’s children, Alice, is married to a man that he doesn’t trust or particularly like. Derek is worried that, should Alice and her husband get divorced after Derek dies, her husband will receive part of Derek’s assets in a divorce settlement.

After Derek’s death, Alice receives a house from his will and an amount of money. Alice later does get divorced and does end up having to split her assets with her ex-husband. She sells the house and splits the money from the sale with her ex-husband and doesn’t benefit from the nest egg that Derek intended to leave for her future.

How would a trust help Derek?

In order to ensure that Alice retains sole access to the assets that Derek has left her, Derek could put the property and money in a trust for her. The trust would form part of his will and this means that although Alice can benefit from the assets, she doesn’t technically own it and therefore it won’t form part of her estate. This then protects Derek’s assets from any divorce settlements and means her husband won’t benefit from it.

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The trusts we offer are an optional addition to our bespoke will service. Click here to find out more about bespoke wills.

Questions

  • The trustee would then take on full control of the trust fund if the beneficiary is under 18, otherwise the trust funds passes directly to the beneficiary. One of the main benefits of having a trust in place is should the settlor die, the beneficiaries receives the assets in the trust fund more quickly that they would if they were to pass through probate.

  • This document supports the trust deed and outlines your wishes for the assets placed within the trust. Although not legally binding, it can give guidance to the trustees on how you would like your trust to be executed on your behalf. You can update this as often as you wish without having to amend the trust deed itself.

  • When the beneficiary of a trust dies, the trust is then “wound-up”. When creating your trust deed, you should name residual beneficiaries to inherit any assets which remain in the fund should the original beneficiary die. This can be family, friends or even charities.

  • The process is dependant on the type of trust you have placed your assets in. If the trust deed states that they can not access funds before a certain age or must meet a set of requirements, then it’s unlikely that assets will be released early without good reason.

    If the deed states that the beneficiary can have discretionary access to the trust at any time, then the beneficiary will need to formally petition the trustee. The trustee will then make a decision as to whether the funds should be released.

  • The tax imposed on assets in a trust fund depends on the type of trust created. Some types of trusts are tax exempt, or are only subject to charges if they are over a certain value. There are three main tax implications to consider when creating your trust, including:

    • Income Tax
    • Capital Gains Tax
    • Inheritance Tax

    To find out more about how taxes can affect you, and how to protect your funds as much as possible, get in touch.

  • No, you can also put companies, stocks and other valuable assets into a trust. It is not only limited to money and property.

  • Only you, the trustee, and any beneficiaries are able to see the Trust documentation. Unlike wills and some other legal documents, Trusts are not made public, even after death. This is another benefit of using Trusts alongside or instead of a will, as its contents will remain private at all times.

  • With so many types of will available, it can be difficult to know where to start. That’s why we’re here to listen to your personal circumstances, your wishes and guide you towards the best trust for you. With so many complexities, it’s imperative you seek the advice of a specialist to avoid any unwanted issues in managing your trust going forward.