Just like with Wills, there is a misconception that only wealthy people need trusts. This is not the case, and trusts can be used for various circumstances, such as protection of property and assets, tax planning, and securing funds for your family.
Property Protection Trusts
The main benefit to a property protection trust is to ensure that, where there is more than one person who owns a property, each owner can protect their share and decide who it will be left to on death. This also protects your property (jointly owned or not) from being used to pay for future care home fees in your old age.
Examples of situations that would benefit from a property protection trust are:
- If you die and your partner remarries, they would only be able to gift their share of the property to their new spouse. If you intended for your share of the property to be left to your children, this would guarantee that your wishes were followed.
- If you require residential care in the future and do not wish to have your property (or your share of the property) included in your assessment and potentially lose that property in order to cover your care home fees.
Tax Planning with Family Trusts
More and more families are exceeding the Inheritance Tax thresholds, despite not believing they have much to leave their families besides their home, thanks to rising house prices. This means that families of the deceased could be faced with a hefty Inheritance Tax bill and no resources to pay it.
Through proper tax planning, including the use of family trusts, you are able to ringfence assets to either cover the estimated Inheritance Tax liability that your family will have, or to remove assets from your estate in order to stay within those tax thresholds.
The benefits to family trusts include but are not limited to:
- Shielding assets for beneficiaries who may be unable to manage them independently, either throughout their lifetime or until they reach adulthood.
- Protecting assets from divorce settlements or business creditors.
- Ensuring beneficiaries’ eligibility for state benefits remains intact.
- Caring for both a current spouse and children from previous relationships.
- Reducing or avoiding Inheritance Tax for family members and their estates.
A Bereaved Minors Trust
This type of trust is very useful when providing for children under 18 specifically.
Depending on how the trust is arranged, the beneficiaries (typically your children) may be entitled to all the income arising from the trust, or conditions may be applied to when they can access the trust.
Typically, a trust will be arranged so that the beneficiary becomes absolutely entitled to the trust when they reach 18, however, some people choose to defer entitlement until age 25.
Examples of situations that would benefit from a property protection trust are:
- If you die and your partner remarries, they would only be able to gift their share of the property to their new spouse. If you intended for your share of the property to be left to your children, this would guarantee that your wishes were followed.
- If you require residential care in the future and do not wish to have your property (or your share of the property) included in your assessment and potentially lose that property in order to cover your care home fees.
If you are in any doubt as to whether or not you should create a trust, you should give us a call for free chat.