Bishop & Sewell

Trusts are used extensively to preserve and protect the family’s assets by ensuring they pass to the correct people when you decide they should inherit.

However, they also offer a valuable solution for clients who want to minimise inheritance tax (IHT) associated with property.

Many families’ assets consist of the accumulation of real estate through a number of investment properties or second homes. With the long-term increase in property prices, this is becoming a major tax issue on death.

The use of trusts is an excellent planning tool for IHT, capital gains tax (CGT) and income tax planning, as well as ensuring the assets pass to the correct people. Assets are looked after by a third party, known as the ‘Trustee’, to avoid anything passing to someone you don’t want to inherit.

Your Will can be drafted (or redrafted) to include a Trust for various protective reasons:

  • If you have a sole beneficiary and want your inheritance to pass to your grandchildren and not your beneficiary’s spouse;
  • To protect assets for those who are too young to handle their affairs;
  • Or to protect assets from children with problems, such as mental health issues, or alcohol, gambling or drug addictions.

There are two types of trust you can use:

Life Interest Trusts: Assets are held on behalf of a beneficiary for their lifetime and then passed onto another on their death. There are positive tax reasons for doing this, as the value of these assets fall under the beneficiary’s estate for inheritance tax (IHT) purposes. This is the case even though the capital value isn’t accessible during their lifetime. However, if the value of their estate is close to or above the nil rate band before the money is passed on, you may want to consider a Discretionary Trust instead, to avoid IHT.

Discretionary Trusts: The Trustee has the discretion to choose who benefits and by how much. For example, to children once they become adult.

How Our Trusts Solicitors Can Help

We have years of experience of advising families and individuals on the value of Trusts. We can help you decide if this is the best option and, if so, which type of Trust is most appropriate, and draft the Trust document for you.