Is a trust right for your family’s future?
Trusts are a way to hold assets on behalf of or for the benefit of another person and they are a way to help preserve assets or wealth for a family, so how do you know if one is right for your family and how do you set one up?
Assets or money put into a trust is owned by the trust and not the individual, however you can retain control of what happens to it. Most people set up a trust to ensure there is support for their children and grandchildren in the future when they are not around. It can also help to pass on assets and money to them when they are of an age not to waste it or to help provide care and financial security for them if they have a disability or a health concern. Trusts also help to ringfence assets from a relationship or business breakdown and they can help with inheritance tax planning.
The most common type of trust used is a discretionary trust and both income and capital can be paid to one of more of the beneficiaries at the discretion of the trustees. This is more flexible if the specific needs of the beneficiary are uncertain.
Other types of trust include a Wills trust which is commonly used by couples to split ownership of the family home if they own it as tenants in common. Instead of leaving their share to the remaining spouse they each leave it to a trust which comes into being following the death of the first partner. There could be some Inheritance Tax benefits to this type of trust and it can also help to ring-fence the deceased’s share from future care home assessments.
A life interest trust may be used to help avoid disinheritance in the future. For example, if a partner dies leaving children from the relationship, they are likely to expect to inherit some of the family estate in the future. However, if the surviving partner remarries and does not make a provision for their children in their Will, there is a chance that their new spouse will inherit everything. This can also help to avoid a future inheritance dispute. Typically, with a life interest trust a share of the family home is left to the children and the spouse is able to carry on enjoying the right to live in the property. This type of trust will not exempt your home from being taken into account by a local authority when calculating assets and assessing your care home costs.
A disability trust is often used to provide for the future needs of children with physical and mental disabilities to ensure their finances and interests are looked after one their parents have passed away.
A personal injury trust is commonly set up following a personal injury award being made and it will protect the assets for the person during their lifetime for their benefit.
There are a number of other considerations to take into account with all of these different trust structures and you are advised to take legal advice first as every family situation will be different and it is important that the legal wording needs to be precise, especially when choosing trustees who will look after the assets on behalf of the beneficiaries.
We are happy to guide you through choosing and setting up any type of trust.