Trusts & Tax Planning

Whether you are seeking to arrange how your estate should be dealt with after you die or you would like to mitigate the burden of inheritance tax, trusts are often a way to achieve your goal.

With careful planning and the advice of a specialist trust and tax planning solicitor you can protect your finances from Inheritance, Capital Gains and Income taxes.

A trust is a legal mechanism that is designed to manage the assets of one person for the benefit of another and can be a very effective way to reduce an inheritance tax liability.

There are two types of trust; Settlement Trusts and Will Trusts. Generally speaking a Settlement Trust is set up during the benefactors lifetime and usually involves the formal transfer of assets to a small group of people or a trust company who are given instructions to hold assets for the benefit of beneficiaries. If the trust is to take immediate effect, then it is usually dealt with by using a trust deed known as a ‘Settlement’.

If a trust is to be created on, or shortly after death the trust rules will be set out in the benefactors Will. This is known as a ‘Will Trust’ and like a Settlement Trust it will instruct the trustees on how to hold its assets and inform them of any rules or conditions that the trustees and the beneficiaries must adhere to.

The uniqueness of a trust is the way it separates the legal ownership and beneficial ownership, of the assets it holds. The trustees are the legal owners whilst the beneficial owners are the beneficiaries.

A trust’s lifetime can be flexible. It may just exist long enough to execute the purpose for which it was set up, or it could last for many years. The current maximum lifetime for a trust is 80 years unless it is a charitable trust, in which case there is no limit. However, irrespective of the duration of a trust, trustees are usually given the authority to terminate a trust at their discretion.

Setting up a trust is a complex process and getting the correct advice, based on what you want to achieve, could save you thousands of pounds. This should be done with the assistance of a specialist Trust solicitor who will advise you on which trust to use and the tax advantages it can bring.