There are few taxes more unpopular than inheritance tax. A poll by the financial website, loveMONEY last year found that an incredible 90% of Brits believe it is unfair.
However, there are a number of perfectly legitimate ways to reduce the amount of tax your estate will have to pay. One of those is making use of a Trust.
What is a Trust?
A Trust is a legal arrangement where your assets – such as property, cash or investments – are given to trustees, who will oversee them for the benefit of a third person. For example, you might want to put some savings into a Trust which your children can then benefit from at a later date.
When you place items into a Trust, they technically no longer belong to you. As a result, when it comes to working out the inheritance tax due on your estate, they aren’t included.
Instead, the assets belong to the Trust. The trustees are charged with managing those assets in the interest of the beneficiaries you have named, until some time when those beneficiaries can take control.
The many different types of Trust
Trusts come in a variety of different forms, which will suit different circumstances.
The simplest form is a Bare Trust – this basically hands over ownership of the assets to the beneficiary immediately, so long as they are over the age of 18.
Alternatively, there is an Interest in Possession Trust. This gives the beneficiary income from the assets held within the Trust, but they don’t have a right to the assets generating that income. An example of this is that you might put shares in this form of Trust which would pay an income to your partner, but your children would get ownership of the shares themselves once your partner died.
Then there is the Discretionary Trust, which is where the trustees have responsibility for deciding how the assets within the Trust are distributed. You could therefore leave assets in the Trust for your grandchildren, with your children named as the trustees. They could then determine who gets what at a later date.
Dividing your assets
Trusts are a useful way to take control of passing on your assets to your loved ones and can serve as a complement to a comprehensive Will. Without a Will in place, you have no say on who will get your assets and could put your loved ones through further heartache after your passing.
To discuss your Will and estate planning needs today please call E.L.M Legal Services 0800 019 4557 or Email: INFO@ELM-ONLINE.CO.UK