Using Trusts in Financial Planning

Trusts can speed up the payment of funds to beneficiaries without resorting to probate or other lengthy procedures. In some circumstances a trust can put assets outside of an estate so that the value is excluded from an Inheritance Tax calculation. Trusts can also exclude assets from other types of assessment thus protecting valuable state benefits.

A life assurance policy can be written in trust so that instead of the benefits being paid to individuals, they are paid to trustees for them to distribute. This can speed up the process and reduce exposure to taxation.

A gift to grandchildren, when they are young, might be intended for them to use at age 18 for example – a Bare Trust might be the best option, especially for smaller amounts.

A Discretionary Trust might be more appropriate when the identity of the beneficiaries might change, or some degree of control is to be retained. In some circumstances taking capital out of an estate to generate tax efficient income can be helpful.

Benefits can include reduced exposure to Inheritance Tax, preservation of the estate and distribution of benefits within the parameters set by the donor(s). If you are not sure whether trust planning might help – it costs nothing for an initial consultation.

Understanding the tax implications of these arrangements, the potential timescale and selection of investments is a matter for professional financial advice together with correct construction of the trust deed. If you feel this is an area you should explore – contact an Independent Financial Adviser.

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