TRUSTS
Making the complex clear
Trusts are not as complicated as you think. We’ve helped many clients utilise trusts to save inheritance tax as well as to maintain control over what happens to their estates upon death. Choosing the right investment strategy is vital when using trusts in your planning.
Keeping control
Placing investments in trusts are a good way to keep control of what happens to your assets after you pass away. You can also use them to gift money, tax efficiently, whilst you are alive. The tax treatment of trusts can also mean that they are often incredibly useful when planning for inheritance tax. However, as with most parts of the financial advice landscape, they are reasonably complicated. At Financial Framework our people have years of experience in arranging the most efficient trusts and working with the right specialists to ensure that you never have to worry about passing your hard-earned capital on to future generations.
How do trusts work?
As the creator (sometimes known as the ‘settler’) of a trust, you stipulate how it should be run. After you pass away, the ownership and day-to-day control of the trust will move to your nominated trustees, who are legally obliged to manage the assets on behalf of your beneficiaries. You will agree a trust deed and memo of wishes, which sets out how the trustees should do that. As such, it’s vital that you have complete confidence in your trustees who will have strict obligations to adhere to.
Assets placed in trust may not form part of your estate, which means that they may not be included when someone works out how much overall inheritance tax is due, providing that you live for seven years after placing them into trust or you have made the use of a variety of different trusts available for planning. Because of this, it is best to look at trusts as early as possible in your retirement planning journey. That said, there are taxation implications.
It is a reasonably common misconception that tax does not apply to assets placed in trust. There are a number of differences, dependent on the exact type and structure of the trust and we can guide you through this. Firstly, it’s important that you utilise your full nil rate band of £325,000. There is also the RNRB which is an additional inheritance tax nil rate band conditional on a residence being passed on death to a direct descendant. This is currently £125,000 and rises to £175,000 by 2020 to 2021.
We will take you through the different types of trust arrangements and when they are most appropriate to use throughout your planning stages.
Please note
The Financial Conduct Authority does not regulate trust advice.