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Estate Planning & Trusts

Your estate includes your property, possessions, savings and investments

What is Estate Planning?

When planning to leave an inheritance, two things are particularly important. You want to ensure that the right people inherit your wealth according to your wishes, and you (probably) want to minimise the amount lost to inheritance (IHT) and other sometimes avoidable, taxes.

To achieve these goals you’ll need an up-to-date will, and you can also reduce the size of your taxable estate, for instance by making gifts during your lifetime. However, sometimes these measures alone may not be enough to achieve your aims. If so, your adviser may recommend that you use a trust.

What are Trusts?

A Trust is a legal arrangement in which a ‘trustee’ (which may be yourself, your children, or one or more other individuals, or a professional trustee) keeps assets for the benefit of a ‘beneficiary’ (usually one or more individuals). The assets – cash, property or investments – may eventually pass to the beneficiary (e.g. when he/she reaches a certain age) or may be held indefinitely to provide them with a certain benefit (e.g. a place to live or an income).

Trusts are often used when the beneficiary isn’t able to manage the assets themselves, for example if they are minor or dependent children or maybe disabled persons. Placing assets into a Trust will also ensure that they are reserved for that particular beneficiary, rather than being spent or otherwise disposed of. Last but not least, trusts can be used to reduce generational IHT. By placing your assets in a Trust unlike leaving your inheritance to them absolutely, will help ensure your estate is protected not just for the present generation but the generations to follow and particularly against threats to your estate like remarriage after death, divorce, bankruptcy and care costs.

What kinds of Trusts are there?

There are several types of trust, suitable for different purposes. For instance, you may want the beneficiaries to inherit as soon as you die, or only once they reach a certain age, or you may want a trust that holds on to the assets but only pays an income, and so forth.

Generally you can tailor a trust to suit your particular circumstances, so ask your AFPS Consultant about which type will be most suitable

When can you set up a Trust?

You can set up a trust at any time, or have a trust written into your will. Trusts set up as part of a will may have the executor as trustee, but you can choose another trustee if you wish. Once your assets become part of the Trust, the management of the trust assets is then in the hands of your assigned Trustees, so choose your Trustees wisely.

We highly recommend you use Countrywide Tax & Trust Corporation as one of your Trustees, this will ensure that not only your beneficiaries benefit the way you wanted but also that the correct decisions are made in terms of running the trust in a tax efficient manner.

How can a Trust reduce inheritance tax?

The laws surrounding trusts are complex, especially concerning inheritance tax. If you make a mistake when setting up a trust it could create a tax bill for you, so make sure you consult one of our specialist advisers whenever you're considering this option.

When you place assets into certain trusts, those assets are no longer considered part of your estate, and so may not be subject to IHT when you die provided certain criteria are met. Thus, the cash, investments or property belong to the trust, meaning that once the property is held in trust, it’s potentially outside anyone’s estate for inheritance tax purposes.

Not all trusts however, will affect IHT and are not always designed for this purpose. Another potential advantage is that a trust is a way of keeping control and asset protection for the beneficiary; a trust avoids handing over valuable property, cash or investment whilst the beneficiaries are relatively young or vulnerable.

A trust can also be used to help your beneficiaries pay an IHT bill. You can set up a special kind of life insurance to pay into a trust (so that it falls outside your estate) and cover the amount to be paid.

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To find out more about how we can help, please call, email or fill-in one of the forms below. We are based in Wokingham, Berkshire and have a growing client base throughout the South East and indeed across the country. For local appointments we can arrange to meet in person at your home and if you are further afield we can arrange a phone call or video conference call at a time to suit you.