Gardner Leader

Trusts & wealth protection

A trust is created when assets are gifted by a "Settlor" to "Trustees" with specific terms as to who the "Beneficiaries" are and how/when they can benefit. A trust can be set up by a gift during the Settlor's lifetime or by will.  Any form of asset can be transferred to a trust whether property or cash. Legal title to the assets passes to the trustees who hold them and income arising under the terms of the trust for the benefit of the beneficiaries.

Trusts enable a settlor to ensure that assets are made available for others whilst retaining an element of control over them. Some examples of instances when trusts can be useful are as follows:

• Providing for a disabled person
• Providing for a minor
• To hold the proceeds of a life insurance or death in service policy
• To provide funds or property for a number of beneficiaries at the discretion of the trustees
• In a Will to provide a life interest for a spouse or partner whilst ensuring that the assets are protected so as to be available for others after the death of that person (or on remarriage or sale)
• To save tax

The tax treatment of trusts was radically changed in the Finance Act 2006. These changes have limited the effectiveness of gifts to trusts in reducing the value of the settlor’s estate for IHT purposes. Now only lifetime gifts to trusts for disabled beneficiaries and on so called 'bare trusts' for minors are treated as ‘potentially exempt’ for IHT which fall out of the estate after 7 years. Gifts to all other trusts are immediately chargeable to IHT (though only in so far as they exceed the settlor's nil rate band). However, trusts still have a place in lifetime IHT planning. For example successive gifts can be made to trusts of assets up to the value of the nil rate band every 7 years without a charge to IHT arising. If the assets transferred to the trust qualify for business or agricultural property relief no IHT will arise.

We can advise on how lifetime and will trusts can be useful to you and what the tax implications are. There are specific rules on income tax capital gains tax as well as IHT which relate to trusts and which must all be considered. We also offer Trust administration and management services and can offer partners within the practice to act as trustees if you wish.

For more information please email us.

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