When we start talking about trusts many people do not believe they are for them. They believe only the very wealthy need trusts. This is simply not true, the various types of trust and various ways of using them. I would say if own a house with your partner you probably should include a trust in your will.
The use of trusts can be broadly split into two categories, protection of assets and tax planning. Tax planning by the use of trusts in estate planning can be very helpful in ensuring all tax allowances are utilised. However, this is a complex area and cannot be summarised in a few paragraphs. However, we would be happy to discuss your requirements in a free no-obligation consultation.
Property Protection Trusts are probably one of the most commonly used trusts.
The main reason this is used is each owner can give a life interest of their share of the property to their partner/spouse in a Property Protection Trust, whilst ultimately protecting that share for the children the partner/spouse can live in the home until they die and their share of the property passes according to their will.
The main benefits are;
If the survivor remarries they can only gift their share to their new spouse.
If they need residential care in the future only their share can be assessed.
Any capital released can be loaned to the life tenant.
Other common reasons for using trusts are to protect capital when leaving money to Children or other vulnerable people.
A Bereaved Minors Trust is very useful when providing for Children under 18.
The beneficiaries ( your children) are entitled to all the income arising from the trust or it can be used to benefit the bereaved children.
The main befits are;
Minor becomes entitled to the trust property on or before they reach 18.
Entitlement can be deferred until age 25
Vulnerable Beneficiaries Trusts for vulnerable beneficiaries are often referred to as disabled persons’ trust.
Whilst they are very suitable for people with certain disabilities they can be used for people who could be considered vulnerable in other ways.
The main befits are;
Do not affect means-tested benefits.
Can be tax efficient
Offer some flexibility – others can benefit but not a great deal, 5-year grace period after the principals death (to distribute assets or continue with the trust)
There are many other types and variations of trusts for different purposes, which we can as estate planners discuss during our consultations.