Passing on wealth via a will or lifetime gift can sometimes be inefficient. Many people prefer to ringfence gifts in order to protect assets from situations where an outright gifts may be innappropriate for the circumstances. A trust can help ensure that your family get the most out of your assets. People set up family trusts for various reasons, including:
protect assets for beneficiaries who can’t look after the assets themselves;
protect assets from divorcing spouses or business creditors;
protect beneficiaries’ entitlement to state benefits where an inheritance may compromise this;
provide for children under 18 in an income tax-efficient way;
ensure that a current spouse and children from a previous relationship are all cared for;
Reduce or avoid inheritance tax for family members and their estates;
Mitigation of potential care home fees.
Family trusts usually consist of either a life interest trust or a discretionary trust (or a mixture of the both). It is important to get specialist advice on the creation of a trust as there are different tax treatments and liabilities for different ones. It is important to consider what it is that the person making the trust wants to achieve and how this can be managed in the most tax and cost effective way.