A trust can be an effective way of retaining control over your assets whilst benefitting young or vulnerable beneficiaries. It can also be an effective tax planning tool. Whatever your reasons for wishing to establish a trust our team has the expertise to help you explore the options.
We can advise when, or if, a trust is suitable and the most appropriate type. We will also assist the trustees in the administration of the trust.
Trust may come in various names and guises each with different tax treatments however the three main types of trust are:
These are the most simple form of trust. The assets are held in the name of the trustee but once the beneficiary is 18 they have the right ask for all of the capital and income of the trust at any time
Bare trusts are the most straightforward way of passing assets to a young beneficiary; the trustee (often a parent or guardian) look after them until the beneficiary is old enough to inherit.
Interest in possession trusts
A life interest trust would name a beneficiary or beneficiaries entitled to the income (known as life tenants). The capital would be preserved beneficiaries known as remaindermen. Generally, life tenants have no right to capital although modern trust deeds do allow the right small capital payments at the trustees’ discretion.
The income is paid directly to the life tenants and they must declare it on their Self-Assessment tax returns (if they are over 18).
Discretionary Trusts – these trusts include a group or ‘class’ of individuals as beneficiaries. As the name suggests, it is at the trustees’ discretion whether or not income or capital distributions are made to a beneficiary or beneficiaries. If the trust assets exceed the nil rate band on creation the excess value is taxed at 20%. Further inheritance tax is charged, at a maximum of 6%, every 10 years on the value of the trust assets.
Interest earned by a discretionary trust is taxed on the trustees.
Our trust services include:
- Creation and administration of trusts
- Trust accounts and trust tax returns
- Appointment and retiring of Trustees
- Acting as professional trustee
- Winding up of trusts and distribution of assets
- Declaration of trust regarding property co-ownership