A Guide to Wealth Protection: Trusts
The Use of Trusts
How trusts can support and protect wealth from Care Fees, IHT, other taxes, divorce and bankruptcy, probate costs and delays and ensure money goes where you want it to go. Trusts are the cornerstone of many financial planning requirements. So why don’t more people use trusts?
There appear to be reasons which include:
- Trusts are considered to be only relevant for wealthy people
- Trusts are solely there to avoid tax
- They are complex
- They are expensive
Each of these statements are misconceptions. In the main, trusts are simple, with any cosmetic complexity easily dealt with by a specialist. Trusts are as much, if not more, about directing where, when and how monies are paid, rather than avoiding tax. Yes, they can be used for tax efficiency and should be wherever possible, but this is far from their only function. They can be put in place easily and as such - in many cases - are not expensive – indeed they often help save money either through wealth protection, tax reduction or through other efficiencies.
Trusts vary considerably in their type and the rules which apply
Different types of trust will have different rules applying to them around who can set one up, when, how they long they last, what the trustees can do (i.e. “their powers”), who the beneficiaries are, what, when and how changes can be made, how they are wound up, what income can or cannot be paid out (and to whom), the tax treatment in and around the trust and what happens on death.
TRUSTS ARE SIMPLE...COSMETIC COMPLEXITY EASILY DEALT WITH BY A SPECIALIST
There are many names applying to different trust types
All of this is largely irrelevant to you, the reader, because you can adopt the basic principle of wanting to use trusts and leave the finer points to a competent financial planner to sort. The nitty gritty of how this is done is something they can take care of, just as many people leave their bookkeeping to a bookkeeper. The essence of using trusts is about wrapping assets into a controlled area. In this way wealth can be protected. An example would be where an individual or family wishes to keep their assets within their own bloodline.
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Readers should not rely on, or take any action or steps, based on anything written in these guides without first taking appropriate advice. Interface Financial Planning Ltd cannot be held responsible for any decisions based on the wording in these guides where such advice has not been sought or taken.
The information contained in these guides is based on legislation as of the date of preparation and this may be subject to change. We will aim to keep them up to date but inevitably there may be a time delay so current legislation should always be checked.
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