Trusts have been around since medieval times and were originally created for Nobility and wealthy land owners to avoid paying taxes to the Crown. Whilst Trusts have changed substantially since then, Trusts can still reduce or eliminate inheritance tax payable and will increase the amount of inheritance passed down to your children.

In simple terms a Trust is a legal contract in which you (the settlor) give something you own to somebody (your beneficiary). The people involved in a Trust are:

• Settlor (person who creates the Trust and ‘settles’ assets into Trust).
• Trustees (people who the Settlor has chosen to manage their Trust).
• Beneficiaries (the people who will benefit from the Trust).
  

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What are the advantages of placing assets into Trust?

Bloodline Planning

Bloodline planning is the process of ensuring that your assets reach your children, grandchildren and other relatives, rather than ending up in the wrong hands. When assets are distributed to beneficiaries ‘absolutely’ in a standard Will (meaning they receive cash, property or other assets as a direct lump sum payment) much of your inheritance can be lost. Assets passed absolutely are considered to be part of the beneficiary’s Estate and are therefore at risk of attack from any future divorce settlements, creditors and taxation.

In comparison, assets placed into Trust are not formally classed as part of your beneficiary’s Estate and so they are protected from any future divorce settlements your beneficiaries may go through.

Similarly if your beneficiaries ever become bankrupt the money loaned to them from the Trust cannot be attacked by creditors. Utilising Trusts in this way we can ensure that your bloodline is able to benefit completely from the inheritance you want them to receive.

Protect your assets from marriage after death

Placing assets into a Trust on first death ensures that should the surviving spouse/partner re-marry in the future, those assets cannot be taken into the marriage. This removes the threat of your own children being disinherited, while at the same time your surviving partner is still able to access the assets in the Trust.

Reduces tax payable

Trusts have been instrumental in mitigating tax since Medieval times and were initially created for wealthy landowners to avoid paying taxes to the crown. Many people still look to using Trusts as a means of mitigating tax that may otherwise be payable. While Trusts are also subject to Tax, appropriate management by your chosen Trustees can reduce any amount due substantially, particularly the impact of inheritance tax on future generations.

Protect your home from being sold to pay for care fees

Assets placed in Trust (including your family home) could be protected from being sold to pay for care home fees. Capital limits are used to assess a person's ability to pay for care. If at the time you are admitted to care your Estate is worth less than £14,250 then the Local Authority will pay for all of your care. However if your Estate is valued over £23,250 then you must fund the cost of your own care even if this involves selling your family home. With the average care home costing between £800 and £1000 a week it doesn't take long to lose your entire life's savings. The strategic use of Trusts can protect your home and assets from being sold to pay for care fees.

How to protect your children's inheritance

Through the use of Wills and Trusts DCS Financial can help protect your children's inheritance and ensure your assets reach your children, grandchildren and other relatives, rather than ending up in the wrong hands. This is known as 'Bloodline Planning'.

Without the correct “Bloodline Planning”...

• Some, or all of your family's inheritance could be lost.
• Creditors or Bankruptcy claims.
• Further Inheritance Tax bills.

Assets not protected by a Trust could face attack from...

• The Divorce or separation settlements of future generations.
• Creditors or Bankruptcy claims.
• Further Inheritance Tax bills.

When assets are distributed to beneficiaries “absolutely”, (ie. they receive cash, property or other assets as a direct lump sum payment) much can be lost through inheritance tax which is charged at 40%, therefore not protecting your children's inheritance.

Even after inheritance tax these assets are at further risk of attack from any future divorce settlements, creditors and taxation. If assets are placed into Trust rather than distributed absolutely then it will protect your children's inheritance from all of these.

With the strategic use of Wills and Trusts, we can ensure that your children and grandchildren are able to benefit completely from the inheritance you want them to receive and at the same time, protect the family home and other assets from being lost to the costs of Long Term Care, therefore helping to protect your children's inheritance.

‘Estate Planning Products are not regulated by the FCA.’