Monday, 17 July 2017

Five reasons to consider a trust

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Most people understand trusts as a vehicle for mitigating or eliminating inheritance tax, but they are much more flexible than you might think.

1. Managing Assets

Some trusts are flexible and they can be tailored to individual situations. For example, for beneficiaries who do not have the capacity or wish to manage assets, for clients who cannot be trusted to own the asset outright or to avoid conflicts between heirs. Through a trust that is managed by trustees, assets can be distributed to the beneficiaries over time.

2. Protecting assets

Placing assets in certain types of trusts can protect them from creditors, marriage breakdown or from those who might influence beneficiaries. 

3. Flexibility

Some trusts offer clients the flexibility to make a gift into trust for chosen beneficiaries, but still continue to receive a benefit. Some trusts also allow the trustees to retain control beyond age 18, but without it being or becoming a discretionary trust.

4. Minimising tax

Most people understand trusts as a vehicle for mitigating or eliminating inheritance tax. Assets that are placed into trusts are given to the beneficiaries and are no longer part of the settlor's estate, provided the settlor survives seven years. Even if the settlor dies within seven years only the value of the gift is included within their estate, meaning that from day one the growth is outside.

5. Avoid probate

As assets within a trust don’t belong to the settlor, in the event of their death the value of the asset is not included in the estate for probate purposes. Also, when dealing with life policies the insurance provider will be able to pay the death benefit quicker as they can pay the surviving trustees (legal owners) and don’t require the grant of representation.

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