- Protect assets for beneficiaries who cannot look after the assets themselves.
- Protect assets from divorcing spouses or business creditors.
- Protect beneficiaries’ entitlement to state benefits where an inheritance may compromise this.
- Provide for children who are under 18 in an income tax-efficient way.
- Ensure that a current spouse, and children from a previous relationship, are all cared for.
- Reduce inheritance tax.
- Protect family assets from the impact of care fees.
- Avoid waiting for probate before some assets are distributed.
How can someone maintain control of the trust?
A trust can be set up so that a client keeps control over the assets placed in it. This will usually be by acting as a trustee, but might also be stated under the terms of the trust.
By establishing a trust under a will, the client can also ensure that their assets are passed to the right people at the right time, after they die.
A common example is when somebody marries for the second time but has children from their first marriage. Usually, they want to ensure their second spouse is taken care of for the rest of their life, after which the money will pass to their children from the first marriage.
A trust lets them do this, which is one of the reasons why trusts are such a useful estate planning tool.
How can trusts offer protection?
Trusts offer a means of protecting assets for the beneficiary. If a client makes an outright gift to a beneficiary, who then divorces or goes bankrupt, the money could be lost.
However, if it is a discretionary trust, the trustees can choose when to, or whether or not they should, pass on a gift to a potential beneficiary. That means the assets in question are protected further.
How can trusts save IHT?
Trusts are a useful way to save IHT without having to make an outright gift to another person.
For example, if the client places assets into a trust that they can not benefit from, after seven years the assets will fall outside their estate for IHT purposes. And any growth on the assets over that time will immediately be outside their estate.
There are also different IHT planning trusts that allow clients to take an income while reducing their potential IHT.
How can trusts avoid probate delays?
After someone dies, IHT and probate fees must be paid before probate is granted and assets can be distributed in line with the will. However, the executors of a will cannot access the estate’s assets until probate is granted. Catch 22. They must find the money from elsewhere.
