Trusts

There are occasions when it may be necessary to include a trust in your Will; these are usually done to protect assets so that family or children are well provided for after your death or to mitigate against Inheritance Tax (IHT)

Nil Rate Band Trust

Since the 9th October 2007, the limit before Inheritance Tax is due has been set at £600,000 for a married couple or Civil Partners, and still £300,000 for a single person. Above this limit, tax may be payable at a rate of 40%. The following reasons are why Tax Nil Rate Band Trusts are important.

It prevents the assets in the Nil Rate trust from being taken in to account in the estate of the surviving spouse when it comes to paying Nursing Home Fee’s for the survivor.

It safe guards assets for your children either from a previous relationship, or from your current relationship if your surviving spouse were to remarry after you pass.

Allow your families to benefit from the trust over a period of up to 80 years helping them with their own Inheritance Tax planning.
If your children divorce or have their Civil Partnership dissolved, then assets still held in the trust for them may escape being counted as their own when the Courts decide on the split of financial Provisions.

Precatory Trust

This is a trust that is often used when a testator can’t decide to whom to give money or property to, and states that the property should be used in a particular manner but without imposing any legal obligation. For example, in writing a Will, the testator may leave chattels or a collection of items to one individual expressing the wish that they be distributed fairly by that person among certain others.

Life Interest Trust

This type of trust is usually used to ensure that a partner/ Civil partner or spouse is not deprived of a place to live after your death but ensuring the children from the relationship do not lose their inheritance if the partner/civil partner or spouse is involved in a new relationship.

Discretionary Trust

This type of trust gives your trustees the power to give varying amounts of money to a beneficiary as and when they need it. This is particularly useful when making provisions for children. If for example you have a disabled child, grandchild or beneficiary you will want to guarantee that the child is looked after if you die. The problem is that by leaving assets in that disabled person’s name they will almost certainly lose any state benefits they are receiving until the money has run out. They may also be unable to manage money themselves.

Some people therefore decide to leave those assets to one of their other children instead, trusting them to use that money to improve the life of the disabled person. The potential problems and issues that arise out of this course of action are fairly obvious.

By leaving a proportion of their assets in trust to a disabled beneficiary instead, with an alternative beneficiary also named, this problem can be resolved. Trustees are appointed to administer the fund at their discretion, so although the disabled person can benefit from the assets, they do not own them so their benefits are not endangered.

To find out more information on Trusts please contact us

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