Meaby & Co – Lawyers Specialising in Trusts and IHT

Trusts and Inheritance Tax

Meaby & Co’s team can provide you with expert legal advice about Trusts and Inheritance Tax

What is a Trust?

A trust is an arrangement where trustees hold assets, often property, for the benefit of one or more ‘beneficiaries’.

Trusts can be relevant to all kinds of people and are regularly used in a number of common circumstances including:

  • Providing for your husband or wife when you die while protecting the capital for your children
  • Making the most of inheritance tax allowances and exemptions and passing on assets in a tax efficient way
  • Protecting assets for the benefit of people under 18, legally known as minors
  • Helping you provide gifts while still retaining some control over the asset

What types of Trusts are there?

There are various types of trusts but perhaps the one used most often is the Discretionary Trust.

  • If assets are put into a discretionary trust and you survive 7 years, on death they will not form part of your estate.
  • Assets can be transferred into them generally without incurring a Capital Gains Tax charge.

Why should I set up a Trust?

There are many reasons to create a trust, see list below, one or more may apply to you. Many clients set up trusts if they have children who are under the age of 18 and would need looking after, should something happen to you.

Succession Planning

This is where a trust is used to pass shares in a family company or business to children. By using a trust, it is possible to take advantage of reliefs for “qualifying” business assets.

Estate and Tax Planning

Trusts are used by clients who wish to start passing monies or property down to the younger generations. The reason for using a trust is that the beneficiaries are not yet ready to hold those assets in their own right. A trust will allow you to provide for your children or grandchildren and begin the process of passing assets out of your estate for inheritance tax purposes, but retain control as a trustee.

By-Pass Trust

Pass lump sum pension death benefits to family members. You may wish to provide for lump sum pension death benefits to be paid into what is commonly called a “By-Pass Trust”. This can minimise the IHT charge whilst still allowing the spouse or other family members to benefit.

Personal Injury Trust

Preserve compensation received from an injury. If compensation is received as a result of an injury you have suffered then by placing these monies into a special Personal Injury Trust means tested benefits will be preserved.

Why should I look at setting up a Trust in my will?

It is important to consider what the tax implication of your death may be especially for your children. You should also consider the best way of organising how your assets pass down the family, so one or more of the following may apply to you:

  • Provide for a particular person during his or her lifetime, but with the estate (or specified asset) ultimately passing to someone else when that first person dies or remarries
  • Make provision for minor or disabled beneficiaries
  • To provide flexibility and allow decisions to be made regarding your estate depending on the circumstances in existence at the time of your death
  • Consider a Discretionary Trust to preserve assets for children on second marriage and also “ring fence” assets when the possibility of nursing home care fees should be considered

Trust law is a complicated area of law and one in which you should always take specialist advice.

Are your existing Trusts still fulfilling their original objectives?

Many trusts were set up years ago may no longer fulfil their original objectives.

  • Do you already have a trust in place, but have not reviewed it since the changes to the inheritance tax regime or would like to consider bringing it to an end?
  • Are you a trustee of a trust requiring advice on your duties and responsibilities?
  • Are you a beneficiary of a trust and would like advice as regards your position?

In recent years new legislation and regulations have reduced the effectiveness and benefit of trusts, however they may still be relevant when it comes to your Estate Planning.

If you would like to talk to us about trusts, please call us on 0207 703 5034 or send the team an email info@meaby.co.uk

For more information about the use of trusts or to speak with one of the team complete the form below

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