Trusts

"The use of Trusts is becoming more common in modern estate planning, but it is vital you get the correct advice"

Below are two examples of how trusts could be used to ensure your assets are protected and your loved ones protected.

Property Trusts

Whilst you might have planned to leave your home in your will, the current state of the housing markets has meant that many parents are signing over their homes whilst they're still alive.

However, do you know the risks of transferring your home to your children during your lifetime?

1) A local authority could ignore the transaction, without limit of time, if they consider that a significant reason for doing it was to avoid paying long term care fees –  why else would you give your house to your children and continue to live in it?

2) The value of the house will be added back into your estate and be subject to Inheritance Tax. This will be the case unless Income Tax is paid on the rental value of your home - even if you are not actually paying rent to your children.

3) Unless your children live with you, the house will be subject to Capital Gains Tax on its increased value from the date of the transfer.

4) If your children become involved in a marital dispute or financial difficulties, your home may be considered to be part of their assets and could form part of any settlement that they have to make.

To mitigate the risk of one of these things happening, why not consider an alternative? Transferring assets into a trust during your lifetime is an alternative way of transferring wealth between generations.

Children’s Trusts

If you do not make provision for your children’s financial future, then whilst the child is under the age of 18 years, their inheritance is held under a legal trust for their benefit. This is a complex and expensive legal procedure, as it involves an application to the courts to allow for the trust to be established. In addition to this expense, after the child reaches 18, they are quite free to spend (or worse squander) it.

Many people do not feel that this provision is suitable and therefore include this special and flexible trust in their professionally drafted Wills.

Through the Children’s Trust, the parents can place an age restriction on the inheritance of 21 or maybe 25 years of age. In addition, they would also nominate trustees. These are people they have total confidence in to manage the trust for their children until they become of age and thus eliminate any costly and complex court fees. These are also exceptionally flexible trusts. Should the trustees feel that it is suitable, they can advance funds to the children prior to the age of inheritance. For example, should a child need a life-saving operation or require funds for university.

If you have disabled or handicapped children, you can also make further long term, secure financial provision for them.

As you can see, there is so much consider when planning your estate, it is so important to get professional advice. To have a chat about your situation and options, please use the "Contact Me" button below to ask any questions or to arrange a no-obligation meeting to discuss your requirements.