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Trusts; the Basics

Trusts Veta Law

Trusts allow you to give money away, but the terms of its distribution (for example, how much and to whom) can be decided in the future. This could be helpful in various ways, such as if you are concerned one of the recipients may get divorced or if it would be simply unsuitable to give someone a large sum of money all at once, like children or vulnerable adults. In short, trusts give you flexibility and protection in how your wealth is distributed. Trusts are taxed differently and sometimes using a trust can achieve a considerable tax saving.

 

We will explain the tax consequences and the administrative work that is involved in having a trust. Sometimes trusts are an unnecessary complication and sometimes trusts can be incredibly helpful. At Veta Law, we want you to understand the advantages and the disadvantages of using trusts, so that your decisions are well-informed and you have realistic expectations for the future.

The 4 Stages of a Trust
9

Creating the Trust

Trusts are usually created using a formal trust deed. Trusts can also be contained in a Will and come into effect only on death.
9

Transfer of Assets

Transferring assets into trust will often have tax consequences. It is important to obtain tax advice beforehand. Assets often require the completion of formal documents in order to transfer them to the trustees.
9

Running the Trust

The trustees are responsible for the assets in the trust. The trustees may need investment and other professional advice, to ensure that the assets are managed within the law and in the best interests of all the beneficiaries. The trustees may need to keep accounts and submit tax returns to HMRC.
7

Ending the Trust

The trust could be ended by the trustees, or on the occurrence of a certain event which is normally detailed in the trust documents. The assets will then be transferred out of the trust to the beneficiaries who are entitled to them.

Veta Law Peace of Mind North WestVeta Law’s View on Trusts

Trusts can be extremely helpful in certain circumstances, but are often not the only answer to a problem. Therefore, it is worth obtaining specialist trust advice to ensure that they are only used in circumstances that are right for you and your family.

Trusts require ongoing supervision and administration (and sometimes costs), and you need to be fully informed about what is involved before you set up a trust. This is important because, as a trustee, you could find yourself personally liable to reimburse the trust, if things go wrong. Overall, trusts can be a great solution, but you need to be fully informed about what is involved at the outset.

You made a complex situation to us, seem so much more straight forward, thank you.

Mr Hughes, the Wirral

More Help About Trusts

Guidance for Trustees

Trustees are personally liable, which means that they can be sued (for example, by one or more of the beneficiaries) if a court determines they have not fulfilled their legal duties. Potential sanctions could include paying money back into the trust, out of their own pocket, if they have caused a drop in the trust’s value.

We are here to guide and protect trustees to prevent this from happening to you. Trustees need to be aware of their legal duties and how to apply them in trustee decision-making.

We have prepared a Guidance Note for Trustees and their Advisors and if you require further assistance please get in touch.

Guidance For Beneficiaries

Being a beneficiary of a trust gives you legal rights to information and potentially assets or income from the trust. Your specific rights will depend upon the type of trust and the terms of the trust documents. We can advise you of your rights and help you get what you are entitled to from the trust. We understand that being a beneficiary of a trust is sometimes frustrating.

The most common complaints we hear from beneficiaries are they feel the trust assets are being mis-managed or they are not getting enough information about what is going on. We can help alleviate these concerns, so please get in touch.

VETA LAW CASE

Preserving A Widow’s Right to Remain At Home

We were instructed by a lady whose husband had recently died. She was his second wife and they had 1 son together. Her late husband also had 2 daughters from his first marriage. Her husband had wanted to ensure in his will that his wife (our client) could stay in their house for the rest of her life and receive income from his investments, but on her death the house sale proceeds and the investments would be split equally between his 3 children. His will included a trust to put these arrangements in place.

We set up the trust and transferred the ownership of the property to the trustees. We notified HMRC that the trust had been established. We transferred various other investments into the trust, in accordance with the will and completed the necessary tax forms. We obtained independent financial advice for the trustees. We informed the 2 daughters (from the 1st marriage) of the arrangements put in place by their late father’s will. They were not surprised by the terms of the will, and were satisfied that whilst they could not inherit immediately, their share of the property and investments was secured for them and being properly managed.

Our client was relieved she could stay in her home for the rest of her life and felt secure once all the trust arrangements were in place.

You took the stress out of planning for the future and got to grips quickly with our tricky and all-consuming family business. Thank you, it feels like a weight has been lifted

Ms Sykes, Wilmslow

VETA LAW CASES

Gifts of Wealth to Adult Children

We were instructed by a couple in their fifties whose son was soon to become a university student in Leeds. They wanted to buy him a flat in Leeds to live in whilst he was a student, and possibly for the longer-term or it could be rented out. As their son was still young, they did not want to make an outright gift to him.

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They were conscious that there would be inheritance tax to pay on their deaths and so they asked if we could devise a solution which would achieve 2 objectives:

(1) To provide their son with a home in Leeds without giving him control of it; and

(2) To reduce their inheritance tax bill.

We advised them to create a lifetime trust and transfer the purchase monies into it. The trust could then purchase the Leeds flat. As the purchase monies had been gifted into trust, in 7 years’ time this money would be outside of their estates and thereby reducing their inheritance tax bill. Additional benefits are that as the property was owned by the trust (and not their son), it was protected in case their son became bankrupt and he couldn’t use it as collateral for a loan. Plus the future growth in value of the flat would also be outside of their estates for inheritance tax purposes. Our clients remain happy with the trust solution and satisfied it achieves all of their objectives and more.

Note: This section gives you real examples of cases we have dealt with. Our clients gave us their prior consent for this purpose, and names have been changed to protect confidentiality.

Sale of a Business

We were instructed by the owners of a successful family business, manufacturing and installing fitted furniture. The owners were a married couple in their late fifties with two adult children and six grandchildren. Their son and daughter were not interested in taking over the business, and the owners had been…

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approached by a competitor which had made them a good offer to buy the business. The clients were happy with the offer and wanted to give some of the sale proceeds to their children and grandchildren. However, they did not get on particularly well with their daughter-in-law and were worried she would encourage their son to fritter away any money which he received. Their daughter was a successful businesswoman in her own right with substantial assets of her own, and our clients were concerned that any gift to her would leave her children with an increased Inheritance Tax bill later down the line. We advised the clients to set up two trusts: (1) for their son and his children, and (2) for their daughter and her children. Our clients appointed themselves as trustees of the trusts, to retain some control over the monies. Following careful tax and legal advice from us, our clients transferred their shares into the two trusts, and the transfers qualified for 100% Business Property Relief from Inheritance Tax. This achieved a significant tax saving. The trustees then sold the company shares and the cash proceeds fell into the 2 trusts. Their son did not have control of his lump sum, as it was within the control of the trustees (being our clients). This meant that it was protected from their daughter-in-law. The trustees could give money to their son and grandchildren as they thought appropriate, for example, to pay school fees. Their daughter could leave the money in trust for her children (our clients’ grandchildren), if she did not need it. The money would then not form part of her estate, thereby saving a 40% inheritance tax charge on her death. Our clients are delighted to retire and achieve protection (and tax savings), for the money which they had worked so hard to create.

Note: This section gives you real examples of cases we have dealt with. Our clients gave us their prior consent for this purpose, and names have been changed to protect confidentiality.

Frequently Asked Questions
Why use a Trust?

Here are a few common reasons why people create trusts:-

Veta Law Submark To save tax and we can advise you about how this works;

Veta Law Submark To protect a share of your estate that you intend to be received by vulnerable people (such as, children or disabled beneficiaries). A trust can provide, for example, that they receive a regular income, rather than a larger lump sum;

Veta Law Submark To protect wealth passing to beneficiaries who might experience matrimonial or financial difficulties, such as divorce or bankruptcy;

Veta Law Submark To provide flexibility so that your wealth can be suitably distributed in the future based upon whatever circumstances exist for your family at that time;

Veta Law Submark To provide an income to a beneficiary, whilst enabling the trustees to retain control of the underlying asset.

What are trustees and beneficiaries?
Trustees –are individuals whom you appoint to manage your trust assets. Beneficiaries –are the individuals whom you wish to ultimately receive the trust assets, often children and grandchildren.

About Us

At Veta Law we are happy to answer all your questions about wills, tax planning, trusts, powers of attorney and probate. We offer a free initial call with one of our experts, without obligation, so please do not hesitate to get in touch.

FIND OUT MORE

Contact Us Today

01695 424 611

contactus@vetalaw.com

About Us

At Veta Law we are happy to answer all your questions about wills, tax planning, trusts, powers of attorney and probate. We offer a free initial call with one of our experts, without obligation, so please do not hesitate to get in touch.

FIND OUT MORE

Contact Us Today

01695 424 611

contactus@vetalaw.com