A trust is a legal instrument which can provide you with an effective way to manage your money and assets. You can utilise trusts to accomplish a number of estate planning goals, ensuring that your assets are handled appropriately. Turner Little explains how to use trusts in estate planning.
Types of trust
Trusts are versatile, flexible vehicles for holding and managing assets which can be utilised for estate planning purposes. However the type of trust you set up depends on how you intend to utilise the legal instrument in question, as well as your personal circumstances.
There are two types of trust which can be used for estate planning purposes; living trusts, where you pass property ownership immediately to your beneficiaries and after-death trusts, which are set up within your will and come into effect once you pass away. By creating a new will, you can change the provisions in this type of trust during your lifetime.
Why set up a trust?
There are a number of reasons why you may wish to set up a trust. They can allow you to provide gifts for minor beneficiaries e.g. children, so they have a steady stream of income to support themselves in their younger years, as well as a lump sum pay out when they reach a certain age. You may also wish to set up a trust if you remarry and have children from a previous marriage, so you can financially support your spouse throughout their lifetime and ensure said children inherit the remaining assets.
An after-death trust ensures that a qualified trustee handles your spouse’s financial affairs once you pass away if your spouse lacks the expertise to manage their financial affairs. You may also want to establish an after-death trust if you have a disabled child, so you can ensure the finances are in place to provide an appropriate level of care after your passing.
Trusts can be used for multiple purposes if planned strategically. You could, for example, ensure a trust provides money for your beneficiaries during their lifetimes, while giving the money that remains once these beneficiaries pass away to charity. If you prefer beneficiaries to receive money in your lifetime set up a living trust, otherwise set up an after-death trust to ensure your estate continues to provide for your loved ones.
How to Navigate tax issues
We should note that sometimes, trusts come with tax obligations. For instance, various types of trust have different rates of income tax, which must be paid on any revenue that certain assets held inside said trust generates. However if you use trusts strategically, you could possibly lower the tax due on any assets you pass onto your beneficiaries via a trust.
Finally, you can use trusts to bypass probate. If you set up an after-death trust, your estate is required to apply for probate and pay any appropriate estate fees or taxes. But if you establish a living trust the assets do not count as part of your estate, so it can bypass the probate process, ensuring your assets are transferred and distributed to your beneficiaries according to your wishes.
Turner Little
There are multiple reasons for using trusts for estate planning purposes. The type of trust you establish depends on your intention, so you would be advised to enlist expert aide to ensure you carry out this task effectively. Turner Little provides the trust creation services you need so you can strategically utilise trusts to ensure your estate provides for your loved ones.
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.
