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This website contains information which may or may not be applicableto your own situation and circumstances.

Any information or advice on this site does not constitute a personal recommendation. If you have any doubts as to whether a product or service is suitable for you, please seek independent advice.

Trust Advice

Anyone who wishes to exercise control over their assets with lifetime succession planning should consider trusts for 5 reasons:

• Succession planning after death
• Planning in the event of incapacity
• Protection of wealth or assets from third parties (legally)
• Control of who access or receive funds
• Inheritance tax planning.

Simple trust planning is discussed in our Protection related section, when setting up a life policy. This section is more in-depth, aimed at information outside of simple life policy trusts.

Trusts were first established by barons, knights and other wealthy nobles during the Crusades, and were a way of ensuring their land and possessions would be disposed of in accordance with their wishes should they become over familiar with Turkish steel.

So, while there are many varieties of trust, they all share the same ultimate aim: to ensure that assets such as land, money, shares and even antiques (collectively known as the "trust property") are passed on to the "beneficiaries" in a way that the "donor" would want.

Trustees

The legal owners of the "trust fund" are known as "trustees", and it is they who administer the fund on a day-to-day basis and ensure that tax is paid out of it.

They also decide where to invest the trust's assets, although this must always be in the best interests of the beneficiaries.

Usually, the trustees will seek professional advice to ensure the assets are wisely invested from both a tax and asset allocation perspective.

Trusts can be used in all kinds of circumstances such as:

• When someone is unable to handle their own affairs because of incapacitation
• If a person wants to distribute land or assets to loved ones while they're still alive
• Under the terms of a will.

Individual trusts can have attractive tax advantages and are often used to reduce inheritance tax (IHT) bills and for other tax planning purposes.

For example, if a life assurance policy is set up under a trust, the proceeds can be paid outside of the deceased's estate, which avoids IHT.

Legal advice

However, bear in mind that trusts and their tax treatment can be highly complicated and need to be discussed at greater length with an expert, particularly as the government is currently clamping down on certain types of trust and their favourable IHT treatment.

Anyone interested in setting up a trust will need a professional to draw up the "trust deed" and will have to appoint trustees, at least two. A trustee can be a professional familiar with trusts - a lawyer, for example – but we do not recommend this as often there are high associated costs and a lack of flexibility introduced (which you may want of course!). Trustees can appoint adverse or other professionals when required later on and this is retains flexibility whilst not taking away the availability of professionals being involved later.

Types of Trust in existence:

• Discretionary trusts
• Interest in possession trusts
• Loan trusts
• Accumulation and maintenance trusts

With the change in rules announced in March 2006, and the alterations that are to be finalised in October 2008, we would suggest that anyone with a trust review it now (up to 5 October 2008) to ensure continuing viability. After this date changes could result in further tax charges of 20% and ongoing tax charges!