These are legal ways of dealing with assets for the benefit of a beneficiary or beneficiaries. Trusts were frequently used as a method of mitigating tax liabilities. While a large amount of the loopholes have been closed, trusts can still provide a tax beneficial method of dealing with an asset. This is because income arising from a trust is only liable to basic rate income tax whatever the amount as long as the trust is set up correctly. These can be used to minimise any inheritance tax liability and can also allow you to control how the inheritance is used long after you have passed away.
The benefits of using a trust should not be underestimated. For example, where leaving a property to a child of yours you can place this in trust so they only have a lifetime interest. This means that should they divorce, their spouse would not be entitled to claim a share of the property. If they were made bankrupt the Trustee or Official Receiver could not come after the property.
As well as being set up in a Will, trusts can be created during your own lifetime. Most commonly these will be used to avoid having to sell your home to pay the costs of going into care. You have to be careful how these are set up, as tax liabilities can arise upon establishing a trust.
There are a myriad of options potentially available to ensure that your wishes are met whilst minimising any tax liability .
For further information, please contact Mrs Maria Cosslett on 029 2080 3116 or email firstname.lastname@example.org.
Mrs Cosslett is a Fellow of the Chartered Institute of Legal Executives and a Member of the Society of Estate and Trusts Practitioners (STEP) and of the Solicitors for the Elderly (SFE).