When passing wealth onto children and grandchildren, you may consider using a Trust as they allow you to keep control over money that you are gifting.
What is a Trust?
A Trust is a legal arrangement in which a ‘trustee’ (one or more individuals or a company) keeps assets for the benefit of a ‘beneficiary’ (one or more individuals).
Trusts make it possible to give gifts to others while keeping control over the money. Usually when you set up a Trust you can choose who receives the gift and when. With certain Trusts you can also make gifts while continuing to benefit from the money in some way.
What are the benefits of using a Trust?
Trusts are often used as a way to give gifts to people who cannot look after the money themselves, for example if they are too young, they lack experience looking after money or are disabled or in ill health.
One of the primary benefits of using a Trust is that it allows you to have control over the money. You are able to control how, when and in what circumstances the gift is received by the trustee.
Making gifts while taking an income
Some Trusts allow you to give money while taking an income from it through regular withdrawals. You can decide how much money you would like to withdraw and how often. It is important to note that once the Trust is set up you cannot change it, therefore it could be useful to consult with a Financial Adviser at Four Wealth Management before setting up the Trust. The remainder of the Trust will be paid to the beneficiaries upon your death.
Using Trusts to reduce Inheritance Tax
When planning to leave an inheritance you want to ensure the right people inherit your wealth according to your wishes and to minimise Inheritance Tax. You can reduce the size of your estate by making gifts during your lifetime, but an adviser may recommend also using a Trust.
If you put some of your assets into a trust, which neither yourself or your spouse can benefit from then the assets are no longer part of your estate for inheritance tax purposes. For example, you can set up a Trust for your adult children, grandchildren or other family members.
Tax implications of a Trust
Trusts and the tax implications surrounding them are very complex; our Financial Advisers will help you to decide if a Trust is suitable for your circumstances.
Some types of Trusts are subject to different tax rules and the Trust might have to pay Inheritance Tax. Trustees are likely to be liable for Income Tax and Capital Gains Tax.
Find out if a Trust is suitable for your circumstances
Four Wealth Management offer a no-obligation face to face review of your finances and can determine if a Trust is suitable for your individual circumstances.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.
Trusts are not regulated by the Financial Conduct Authority