Although some of the rules changed in 2006, setting up a trust can still be an efficient way of reducing inheritance tax (IHT) through lifetime gifts but without losing control. Trusts can also be of benefit for asset protection purposes.
Although a simple enough process to put in place it can be complex with regards to the type of trust chosen and the trustees named to administer it in accordance with your wishes. We can help you set up the best kind of trust for your needs which could be one of the following:
Bare (Absolute) trust – The beneficiaries are named at the outset. This is written in stone and the names can’t be changed later. Typically this would be used by an individual who wishes to put assets beyond the reach of future creditors.
Interest in possession trusts – In this instance there are usually a limited number of beneficiaries and their share is fixed at the outset, so that they are entitled to a share of income in the trust as it arises, with a fixed share of capital at some point in the future, usually on reaching a specific age or on the happening of a specific event. An example of where this might be used would be where a parent wants to pass on some assets to an adult child but is unsure of the child’s spouse and doesn’t want to give them to the child outright and thus expose them to being lost under a divorce settlement.
Discretionary trusts – There is normally a wide class of beneficiaries and they have no fixed right to either the income or the capital of the trust – it is wholly at the discretion of the trustees (usually with guidance from the person setting up the trust) as to who should get income and capital at any particular point in time. Typically this might be used by a grandparent who wants to pass assets/funds to their grandchildren, bypassing their parents.
If you live in Edinburgh or further North and would like to find out more about Trusts then call Diamond Financial on 0131 222 9680, or if you live in the Borders, call our Duns office on 01361 884466.