If you want to protect your finances long-term, you may want to think about creating a trust. A trust is a legal vehicle designed to hold assets or property, which provides a range of advantages when it comes to wealth management. Turner Little asks: what are the benefits of establishing a trust?
Broad benefits
There are three key benefits to trusts. First, they give you the means to shield your assets, so they cannot be drawn upon to cover care home costs. Second, they guarantee a stable income for your loved ones, ensuring they can enjoy financial stability in future. Third, trusts can help you avoid inheritance tax, allowing you to reduce the tax bill due on your estate when you die.
Shielding your assets
You need to think about how you will meet expenses such as your residential care home fees before you retire. If you do not put aside sufficient funds, the government can use your house to meet care home fees. However as we noted above, you can use trusts to shield your assets and this means that if you use trusts strategically, you can ensure that your home is inherited by your loved ones instead.
Guaranteeing regular income
Trusts can also be used to guarantee regular revenue for your loved ones. This can prove advantageous if your chosen beneficiary is too young to inherit assets when you pass away, as a trust will shield your assets until they are 18 and can legally inherit them. With a trust you can also supply gradual income for a beneficiary who is not good at managing money and ensure that any beneficiaries who cannot take care of themselves are provided for financially.
Avoiding inheritance tax
Finally, you can use trusts to avoid inheritance tax. Your estate is required by law to pay a 40% inheritance tax on any assets above a certain threshold, which currently sits at £325,000. If you place an asset in a trust, it is legally removed from your estate, so it will no longer be subject to inheritance tax once you pass away. This allows you bequeath the asset as a gift to a loved one in its entirety though this is affected if, as the settlor to the trust, you do not survive for seven years after making the gift into trust.
Attain expert advice
In other words, if you set up trusts strategically, you can utilise these legal instruments as incredibly versatile financial planning vehicles, allowing you to provide for your loved ones more effectively. However UK trust law can be complex, so it is wise to enlist expert advice when using these vehicles for financial planning purposes. Turner Little can supply you with the advice you need to set up a trust.
Turner Little
Turner Little was founded in 1998 and it has since become a well-established UK based professional Company Registration Agent, Registered Bank Intermediaries and Business Consultants, as well as Trust provider. You can receive our monthly newsletter by signing up using the form below.
