March 7, 2017
Did you know that trusts came into being in the 14th century? Did you know that they can last for 125 years?
One of the many things I enjoy about my role as a Barrister Intermediary is being able to demystify some of the areas of legacy planning and one of the most misconstrued seems to be trusts. A lot of people automatically think of trusts as being something only the ‘super rich’ need to use in order to avoid tax. In reality, trusts make up a vital part of legacy planning for issues that can’t be dealt with in your will.
There are mainly two forms of trust: a ‘last will and testament’ trust and a ‘lifetime’ trust. A lifetime trust is, as the name suggests, set up in your lifetime and gives you a far greater amount of flexibility and control as you are still around to control the ‘trust deed’ which is essentially its’ instruction manual. A ‘last will and testament’ or ‘will’ trust is set up by your executors after you have died as you have left instructions to do so in your will. While still a perfectly useful form of constructing a trust it does mean that you do not have the direct control and supervision that you would get from a lifetime trust.
When you create a trust you become the ‘settlor’, you can also be a ‘trustee’ who runs the trust and lastly you can name your beneficiaries. Trusts can exist for as long as you like or they can run for 125 years which means that is a piece of planning that your children and grandchildren could continue to use. You set up a ‘trust deed’ which informs the trustees how the trust should be run, what your wishes are and how the assets inside should be distributed.
A lot of people move their property into a trust in order to protect it from issues such as ‘sideways disinheritance’ as it is their main asset. One of the first questions I’m asked is whether this means that you can still sell the property. The answer? Yes of course you can, it would simply mean that it is the ‘trustees’ that sell the property rather than ‘Mr and Mrs Smith’.
One of the questions I often ask is ‘do you want your children to inherit at 18’? A variety of emotions can cross people’s faces at that point and you can usually pinpoint the moment they visualise their assets being used to buy pizza and xbox live memberships. Of course everyone is different, however putting something in place to change this age to 25 will involve some form a trust. Does it mean that the money is locked out of reach? Not at all, but it means that the children (as beneficiaries) would have to speak to the trustees in order to access that money.
This is just the tip of the iceberg and trusts need to be discussed in depth. If you have any questions about how trusts could be used to protect what is important in your life then please contact me on 01530 416555 as I’d be happy to have a chat with you about it or click here to learn more about our legal services.