A trust is a legal arrangement that allows you to give away assets such as shares, money and property, in a tax efficient and controlled way for the benefit of people you choose. You can create a trust during your lifetime, or create a trust by will to come into effect on your death.
Trusts are a great way to protect your assets and ensure as much as possible goes to those you choose. There are many types of trust to suit different circumstances, including:
• Discretionary trusts – the trustees decide who will receive the income and capital and when, guided by your wishes. You can set out your wishes in a separate letter to the trustees
• Young persons trusts – ideal for making provision for young people
• Interest in possession trusts – these give an interest in income, but only during a beneficiary’s lifetime or for a shorter period.
Why set up a trust?
There are lots of different reasons why you might want to put your money into trust. However, they all have one thing in common – they can save tax and benefit those you leave behind.
Trusts are useful for:
• Making arrangements for your family, and future additions, because you never know what’s around the corner
• Helping with tax planning to reduce your liability, especially for Inheritance Tax (IHT)
• Making gifts – you can specify at what age and in what circumstances your intended beneficiaries can have them
• Protecting assets if you don’t want the beneficiary to have full control of them
Don’t let the taxman take it
One way to reduce your IHT bill is to give away assets while you’re alive. This could be as an outright lifetime gift, but that’s not always appropriate. Another way is to create a trust, so you can give assets away but retain flexibility over who will benefit from the assets and when.