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What is a trust?

A trust is a way of managing assets (money, investments, land or buildings) for people. There are different types of trusts and they can all be taxed differently.

Trusts involve:

  • the ‘settlor’ - the person who puts assets into a trust
  • the ‘trustee’ - the person who manages the trust
  • the ‘beneficiary’ - the person who benefits from the trust

Trusts are set up for several reasons, including:

  • to control and protect family assets
  • when someone cannot handle their affairs (due to age, disability, incapacity, etc)
  • to pass on assets while you’re still alive
  • to pass on assets when you die (a ‘will trust’)

What is estate planning?

Estate planning is a way of protecting your assets to benefit your family. This can be for many different reasons; you may be concerned about who will handle your assets in the future, or you may even want to do this for your benefit in the future.

What is inheritance tax?

Inheritance Tax is a tax on the estate (the property, money, and possessions) of someone who’s died.

There’s normally no Inheritance Tax to pay if either:

  • the value of your estate is below the £325,000 threshold
  • you leave everything above the £325,000 threshold to your spouse, civil partner, a charity or a community amateur sports club

You may still need to report the estate’s value even if it’s below the threshold.

  • If you give away your home to your children (including adopted, foster or stepchildren) or grandchildren your threshold can increase to £500,000.
  • If you’re married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die.

The standard Inheritance Tax rate is 40%. It’s only charged on the part of your estate that’s above the threshold.

What types of trust are available?

There are many different types of trust that can be set up depending on your situation or how you want to control your assets, including:

  • Bare trusts
  • Interest in possession trusts
  • Mixed trusts
  • Discretionary trusts
  • Will trusts
  • Non-resident trusts
  • Life interest trusts
  • Personal injury trusts

To decide which trust is right for you, speak to a member of our team today.

What trust is right for me?

Understanding which trust is right for you depends on many factors, including:

  • Your financial situation
  • The situation of the trustee
  • How you want your assets to be managed in the trust
  • Who you want to maintain control of your trust
  • The purpose of the trust

Establishing and maintaining can be a very time-costly and complicated task. If you would like advice on which trust fund would be best for you, or if you need practical help with the administration of your Trust, call Jackson Lees solicitors today or fill in the enquiry form and our experienced team will be glad to assist you.

How do I set up a trust?

You don’t need to have any special qualifiers to be applicable for a trust. If you believe you would benefit from a trust then [contact our legal team today].

Setting up a trust is a very precise process that needs to be carefully worded and checked for any legal loopholes. To set up a trust, it's vital to employ the services of an expert.

At Jackson Lees, we have an established legal team that specialises in matters of wills, trusts, and probate. Our legal experts have decades of experience and can assist in all matters. Call today to receive the best legal advice for you. 

What are the advantages of a trust?

There are many perks to using a trust over a will, but some of the most common reasons to choose a trust are:

  • To support someone who can’t manage their money
  • To provide for someone who is under 18
  • To help provide managed funds to the mentally ill or those with poor money management
  • To protect wealth
  • To protect against potential divorce or bankruptcy
  • To bypass inheritance tax - ensuring that your loved ones receive the maximum amount possible
  • To split the benefits

Unlike with a will, you can specify and tailor who benefits from your assets at an in-depth level. For example, one beneficiary may be able to live in a property but if sold the money can go to a different beneficiary.

If you would like to learn more about the benefits of setting up a trust, speak to a member of our team today.

How are the funds distributed?

Funds are distributed depending on the type of trust with which you wish to proceed. For instance, in the event of you setting up a Will Trust, the trustees will have autonomy once you have passed away. They will have the authority to decide when the funds will go to the beneficiaries.

However, if you wish to open a Bare Trust, then the trustee will gain entire access to the trust on the day that they turn 18.

At Jackson Lees, we will be able to give you impartial, expert advice and make sure you set up the correct trust that suits your needs, and the needs of your beneficiaries. If you would like to learn more about how different trusts will allow access to the funds, then contact us today.

Do I have to pay capital gains tax?

Capital Gains Tax is a tax on the profit when you sell an asset that’s increased in value.

It’s the gain you make that’s taxed, not the amount of money you receive. For example, if you bought a painting for £5,000 and sold it later for £25,000, you’ve made a gain of £20,000.

Capital Gains Tax might be payable:

  • If assets are put into a trust
    • Tax is paid by either the person:
    • selling the asset to the trust
    • transferring the asset (the ‘settlor’)
  • If assets are taken out of a trust
    • The trustees usually have to pay the tax if they sell or transfer assets on behalf of the beneficiary.
    • There’s no tax to pay in bare trusts if the assets are transferred to the beneficiary.

Sometimes an asset might be transferred to someone else, but Capital Gains Tax is not payable. This happens when someone dies and an ‘interest in possession’ ends.

Does the 7-year rule apply?

No tax is due on any gifts you give if you live for 7 years after giving them - unless the gift is part of a trust. This is known as the 7-year rule.

If you die within 7 years of giving a gift and there’s Inheritance Tax to pay on it, the amount of tax due after your death depends on when you gave it.

  • Gifts given in the 3 years before your death are taxed at 40%.
  • Gifts given 3 to 7 years before your death are taxed on a sliding scale known as ‘taper relief’.

Taper relief only applies if the total value of gifts made in the 7 years before you die is over the £325,000 tax-free threshold. 

Jackson Lees' Wills, Trusts & Probate team can help you administer an estate, set up or update a Will, or set up a trust. Based across our Liverpool and Wirral offices, our empathetic experts will discuss your situation with you to help you decide what is best for you and your family. Enquire or call today to book a free 30-minute consultation. 

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