Following recent budget announcements, there has been increased interest regarding inheritance tax and strategies for its mitigation. Trusts represent a key method in inheritance tax planning, and I thought I would take this opportunity to write an article on this subject.
So what exactly is a trust? A trust is a legal structure in which one or more people (the settlors) transfer their assets to a trustee, who manages those assets for the benefit of others, these are called the beneficiaries. Settlors can also act as trustees, allowing them to maintain control over the assets they contribute. Trusts can reduce the overall value of your estate, potentially lowering the amount of inheritance tax owed after your death. They also make it possible to give money from the trust to beneficiaries at a future date, with the gift becoming exempt from taxes seven years after being put into the trust, rather than seven years after the beneficiary receives it.
When thinking about setting up a trust, we believe that one of the first things to consider is what level of access you want to retain over the capital. Do you want access to the capital itself? Do you only want income generated from it? Or are you prepared to relinquish all control?
After making this decision, the next important step is to determine who you want as beneficiaries and whether you want the flexibility to change these beneficiaries in the future, or if you are certain that your choices will remain the same.
Armed with the answers to the above we are then able to recommend what we feel would be the most appropriate trust for you.
If this is an area you would like further help with why not pick up the phone today and book a free without obligation consultation.
The content included on this page is based on our understanding of the UK tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances.