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AUS
UK
USATrust & Estate Planning
A Trust is an arrangement which allows you to pass assets to someone else, without losing complete control. When used appropriately, Trusts are particularly beneficial with estate and succession planning. Though notoriously complex, our trust planning experts will discuss the options available to you, in a way that’s easy to understand.
The 3 parties of a Trust are:
The Settlor
The Settlor is the creator of a trust. They provide the assets that will be held within the trust and select the beneficiaries they wish to benefit from those assets in the future.
The Trustee
The Trustees are those whom the assets are entrusted to. They are responsible for the management and distribution of the assets in-line with the trust deed. A trustee must be at least 18 years old, of sound mind and not bankrupt. A company can also be appointed as a trustee.
The Beneficiary
Beneficiaries are those that benefit from the assets placed within the trust. Depending on the type of trust, beneficiaries can be absolute (fixed) or discretionary (flexible).
What can a Trust do for you?
1 Tax Mitigation
Read MoreAssets placed into trust are not considered a part of the settlor’s estate upon death, therefore ...their value is not included when calculating the settlor’s inheritance tax liability. With inheritance tax currently at 40%, the use of a trust can make a huge difference in the amount your loved ones receive when you die.
A settlor must survive 7 years after the assets are placed into trust for the full value to fall out of their estate. If the settlor doesn’t survive 7 years, there is a tapered rate of tax applied.
2 Avoiding Probate
Read MoreOnce assets are placed into trust, they no longer belong to the settlor therefore a grant of ...probate is not required to distribute them.This can save precious time, legal fees and administrative stress.
3 Managing your Assets
Read MoreCertain types of trust can provide flexibility when it comes to distributing assets alongside ...tax mitigation. If you are looking to structure your estate to pass wealth to children/grandchildren that are currently minors, the use of a discretionary trust will ensure they receive the assets when they are capable of managing the responsibility.
If one of your beneficiaries is incapable of managing their assets due to disability, a trust will distribute the assets to them appropriately.
If you are concerned about a conflict between beneficiaries e.g. if you have children from different marriages, a trust will distribute the assets appropriately.
4 Protecting your assets
Read MoreAs the use of a trust passes ownership of the assets to trustees, the assets are protected ...from creditors and soon to be ex-partners during a divorce. A discretionary trust can also protect assets from those who may take advantage of a beneficiary.
For example, partners of a beneficiary who may wish to access the assets for their own gain. A discretionary trust will only pass on the assets to the beneficiary when they deem it in the settlor and beneficiaries’ best interest.
5 Provide Flexibility
Read MoreCertain trusts allow a settlor to place assets in trust for beneficiaries, but still continue to ...benefit from the assets themselves. Trusts also provide flexibility in the way benefits are paid to beneficiaries.
Discretionary trusts are used to ensure benefits are only paid when the beneficiaries are deemed capable of managing the assets appropriately. This is at the discretion of the trustees, in-line with the settlors wishes, hence the name ‘discretionary trust’.
Types of Trust
Absolute/Bare Trust
Beneficiaries are named at outset and cannot be changed. When beneficiaries reach the age of majority (18 in the UK), they can demand their benefits under the trust.
Settlor Included Discretionary Trust
Beneficiaries can be added at any point (including the settlor) and the trustees will use their discretion on who can benefit from the trust and when. Benefits cannot be demanded by beneficiaries as there is no absolute right.
Settlor Excluded Discretionary Trust
Beneficiaries can be added at any point (excluding the settlor) and the trustees will use their discretion on who can benefit from the trust and when. Benefits cannot be demanded by beneficiaries as there is no absolute right.
Discounted Gift Trust
The trust is created by means of a gift, but the settlor retains the right to capital payments from the trust. The ‘discount’ is determined by the actuarial value of the withdrawals and reduces the value that is transferred into trust.
Loan Trust
The trust is created as a loan to the trustees for investment, rather than giving the assets away. The loan is repayable on demand and can be paid periodically or as a single lumpsum.
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