Why Create a Trust?
A trust is a legal arrangement where one or more people (called trustees) manage assets such as money, property or investments on behalf of someone else (the beneficiary). There are many reasons why you may want to create trusts as part of your end-of-life planning. It’s a way to protect and control how your assets are used — either while you’re alive or after you pass away. Many people choose to set up a trust to minimise inheritance tax, while some want to control how much wealth young beneficiaries will receive, choosing to share money over time with grandchildren or vulnerable people.
We offer flexible trust management support tailored to your needs. We are highly experienced in trust services, including discretionary trusts, Will trusts and life interest trusts. We can also help you manage specialist trusts like charitable trusts, trusts of damages and trusts for disabled beneficiaries. Our experienced team is waiting to speak to you about your options. Contact us today by phone or email, or make an enquiry to discuss your requirements.
Trusts: Frequently Asked Questions
1. Discretionary Trusts
After changes introduced by the government recently, this has become one of the most popular forms of trust. You can ensure a number of different people benefit from the creation of a trust. Both income and capital can be paid to one or more beneficiaries at the discretion of the trustees.
There are IHT charges on creation, at 10-year intervals and upon exit, but at a fraction of the normal inheritance tax rate. Depending on the nature of the trust, property may be exempt from IHT altogether. There are also CGT advantages. Income taxes are less straightforward.
2. Will Trusts
Wills can be an excellent vehicle for creating trusts (for more discussion, see the Wills section of this website). The FA2006 changes to IHT created two new kinds of trusts that can only be created in Wills and by a parent for his or her children.
3. Bereaved Minor Trust (BMT)
The BMT is a Will trust created by a parent for their children, with capital vesting by the 18th birthday. This trust carries no additional IHT burdens over the flat 40% charge on assets above the Inheritance Tax nil rate band, so there are no entry, 10-year, or exit fees.
4. 71D (18-25) Trust
The 71D trust is a variation of the BMT that provides an extended trust period up to age 25. It also avoids the charge on creation and 10-year charges, but it is subject to a modified exit charge based on the period from age 18 to exit up to age 25. Anything beyond that is a relevant property trust subject to the regular charging scheme.
Anyone can create a trust, and many who do so would like to establish a legacy for the benefit of children or grandchildren. Many people would also like to mitigate inheritance tax bills, and trusts can be an excellent vehicle for doing just this. Trusts can also be useful if you are concerned about the impact of divorce or bankruptcy on your assets.
Yes, trusts can be subject to Income Tax, Capital Gains Tax and Inheritance Tax. Solicitors help ensure trusts are structured in a tax-efficient way while complying with HMRC requirements. Read further information about how trusts are taxed.
Our expert Private Client team has been advising families on estate and wealth planning, including creating and maintaining trusts, for generations. Our team is led by the firm’s managing director, David Edwards, who has over 35 years of experience dealing with trusts and is a member of the Society of Trust and Estate Practitioners.
Contact us without delay to check your existing trust arrangements. If you need changes, we can ensure your new trust is set up properly. We are very experienced in setting up and managing trusts, so ring us on 01273 604 123, email us at enquire@bbc-law.co.uk, or make an enquiry.
Emily Shearing
Emily is a Director and Head of Wills and Trusts within our Private Client Department.
Read More About EmilyDavid manages to combine solid legal advice with a very human and understanding approach.
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