10 March, 2011
Contrary to popular understanding, trusts are a simple concept and are not only applicable to the more affluent client but can be suitable for anyone who owns assets.
In short, a trust is a private legal arrangement where the ownership of assets is transferred by the legal owner (the Settlor) to someone else (the Trustees) who look after those assets for the benefit of a third party or parties (the Beneficiaries).
Anyone who owns assets can settle a trust. They are an excellent method to incorporate into your family's wealth management. Everyone can use trusts to their advantage, as any asset can be transferred into a trust to offer added protection.
Trusts can also be settled during your lifetime using a nominal amount. They can then be used to manage future funds such as death in service benefits or lump sum pension pay outs so that there is more flexibility as to who can benefit from these. This can also be advantageous for taxation purposes on the beneficiaries' Estates.
Trusts can provide you with security, both in the knowledge that the assets placed into trust are protected by the terms of the trust deed and that trust funds will be managed independently for the benefit of the Beneficiaries. Trusts can also be drafted to cater for specific needs and are flexible so that the Trustees can use their discretion to determine who may benefit, depending on the needs of the various beneficiaries nominated.
Trusts are not however only associated with protecting assets on death. They are commonly used as part of a person's lifetime wealth management and if used as part of an ongoing strategy, they can mitigate any future Inheritance Tax liability.
An added advantage of using trusts is that the Settlor can retain a degree of control of the trust assets if they desire. This can be particularly attractive to clients seeking to protect their family business as intended beneficiaries can benefit from assets without having control of the day-to-day business.
Trusts can also be settled on yourself, so that you have a life interest in the property and then on your death the trust assets will pass to your chosen beneficiaries without the need of obtaining a Grant of Representation. They also offer much more security than making an outright lifetime gift of any substantial value to loved ones and can result in the assets you have worked hard for and saved for all your life being passed safely onto your chosen beneficiaries in the future.
As the assets are transferred into the names of the Trustees, they also take responsibility for administration issues which can be an added advantage for elderly persons. Finally, trusts are private arrangements, they are therefore confidential and are not made public.
Should you have any questions about trusts, please do not hesitate to contact Gregory Poole by email or on 01772 220022. Greg is a qualified member of the Society of Trust and Estate Practitioners.