How wealthy families keep their wealth.

David Cameron’s father’s will makes interesting reading.

He left a fortune of £2,740,000 from which the ex-Prime Minister received the sum of £300,000, but what is interesting is that:-

  • He appointed his children as Executors and Trustees.
  • He and his wife owned their home as Tenants in Common rather than joint owners.
  • His half of the home went into Trust rather than directly to his widow.

 

Cameron Will

 

Trusts have been instrumental in mitigating tax since the Medieval times. Trusts were initially created for the Nobility and wealthy landowners to avoid paying taxes to the Crown. Nowadays, you don’t have to be a Nobleman, or a wealthy landowner to want to take advantage of the many tax strategies Trusts can provide.

The use of Trusts ensures that assets are protected from attack from the following.

  • Care Fees
  • Divorce / Separation
  • Creditors / Bankruptcy
  • Inheritance Tax
  • Generational Inheritance Tax

We have advised many clients from all walks of life in protecting their homes and other assets, so that their children and grandchildren can maximise their inheritance, and we have now launched a fixed price package to specifically tackle the above problems at an affordable price for all home owners and from all walks of life.

Firstly you will receive a free no obligation home visit from one of our trained consultants which usually takes about 1hr where you can ask any questions and discuss the matter in more detail.

Once you have decided to proceed we will take all the necessary instructions and then commence constructing a Will each, a Flexible Family Trust each with Memorandum of Wishes and also a Deed of Severance. Within approximately 2 weeks your consultant will return with all the documents for signing.

 

PPT

On first death, the deceased’s share of the property is passed into their Flexible Family Trust via the Will. The surviving Spouse or Partner continues to live in the property and is still able to move home if they choose to do so. In the event that the survivor enters care, the survivor only owns half a share of the family home.

The beneficiaries have access to the Trust Funds but we ensure that these assets do not enter their estates and so are protected from attack by the following:

  • Marriage after Death – Placing half of the family home and other assets into a Trust on first death ensures that, should the surviving spouse or partner marry in the future, those assets cannot be taken into the marriage and removes the threat of your children being disinherited.
  • Divorce – Placing your assets into a trust ensures if your children or chosen beneficiaries are subject to a divorce then what you intended them to receive is protected from any divorce settlements.
  • Creditors – Similarly if any of your beneficiaries are subject to Creditor claims or bankruptcy then their inheritance would not be exposed to these claims.
  • Care Costs – The trust ensures that they do not add onto the beneficiaries own estates and so cannot be assessed for their care costs.
  • Further or Generational IHT – Holding the assets in the trust ensures that they do not add to the beneficiaries estates and impact on their own Inheritance Tax.

For more information, please call 0161 771 2056 or simply complete the form below
and one of our consultants will gladly answer any questions you may have.

Finance North
Estate Planning Services
Offices in Cheshire and Staffordshire

www.FinanceNorthEPS.co.uk

 

 

 

How Can Trusts Help With Inheritance Tax Burdens?

There are few taxes more unpopular than inheritance tax. A poll by the financial website, loveMONEY last year found that an incredible 90% of Brits believe it is unfair.

However, there are a number of perfectly legitimate ways to reduce the amount of tax your estate will have to pay. One of those is making use of a Trust.

What is a Trust?

A Trust is a legal arrangement where your assets – such as property, cash or investments – are given to trustees, who will oversee them for the benefit of a third person. For example, you might want to put some savings into a Trust which your children can then benefit from at a later date.

When you place items into a Trust, they technically no longer belong to you. As a result, when it comes to working out the inheritance tax due on your estate, they aren’t included.

Instead, the assets belong to the Trust. The trustees are charged with managing those assets in the interest of the beneficiaries you have named, until some time when those beneficiaries can take control.

The many different types of Trust

Trusts come in a variety of different forms, which will suit different circumstances.

The simplest form is a Bare Trust – this basically hands over ownership of the assets to the beneficiary immediately, so long as they are over the age of 18.

Alternatively, there is an Interest in Possession Trust. This gives the beneficiary income from the assets held within the Trust, but they don’t have a right to the assets generating that income. An example of this is that you might put shares in this form of Trust which would pay an income to your partner, but your children would get ownership of the shares themselves once your partner died.

Then there is the Discretionary Trust, which is where the trustees have responsibility for deciding how the assets within the Trust are distributed. You could therefore leave assets in the Trust for your grandchildren, with your children named as the trustees. They could then determine who gets what at a later date.

Dividing your assets

Trusts are a useful way to take control of passing on your assets to your loved ones and can serve as a complement to a comprehensive Will. Without a Will in place, you have no say on who will get your assets and could put your loved ones through further heartache after your passing.

To discuss your Will and estate planning needs today, speak to Finance North Estate Planning Services 0161 771 2056.

Finance North Estate Planning Services
Offices in Cheshire & Staffordshire

Factoring Dependants Into Your Will

Perhaps one of the first things to think about when planning or revising your Will is who your dependants are. Who relies on you financially or for care? These are significant considerations you will need to think about

Obviously, this could include a spouse, civil partner or co-habiting partner, along with any children you may have. This isn’t limited to your natural children; you may have adopted or step-children you will need to consider. It may also include anyone you have been caring for or looking after financially, such as elderly relatives or a child with a disability.

If you and your partner are not married or in a civil partnership, it is vital that you have a Will to protect them should you die. If you don’t then the proceeds from your estate will pass to your children or to other relatives if you have no children. If there are no relatives, your estate will pass to the Crown.  Under the Inheritance Act 1975 your partner may be able to make an application for some of your assets, but this will take time and money.

If you and your partner die before your children are 18 years old, they will need a guardian to take responsibility for them.

You may also consider setting up a Trust to cater for the financial costs of being a guardian, by leaving a property for any children in the Trust until they are older. Usually a guardian will be one of the trustees, but it’s advisable to appoint someone separate as well to help the guardians and ensure there is no conflict of interest.

More thought also needs to go into providing for a child with disabilities. If you have more than one child, it is natural to want to provide for them equally. That said, sharing the proceeds of your estate equally between your children may not be in the disabled child’s best interests.

If you plan to leave a lump sum to each child, you need to assess whether or not the disabled child has the capability to make decisions for themselves. If they don’t have capacity to deal with their financial affairs, a deputy may need to be appointed. This is likely to eat into some of the funds of their inheritance.

You will also need to consider whether any inheritance left to a disabled child will affect their entitlement to means tested benefits. If it does, their inheritance may have unintended consequences that leave them worse off financially rather than better.

Again, setting up a Trust to provide an income for the disabled child is often a sensible approach to take.

There are different types of Trusts to consider and Trust law is complex. A good Solicitor, Estate Planner or Will Writing Professional will be able to advise you on this and all aspects of providing for your dependants in the way that you want.

The New Tax Band: What If My Property Is In Trust?

The way properties are judged for Inheritance Tax is about to change.

This month (April 2017), the new Residence Nil Rate Band (RNRB) will be introduced. This new band will allow parents to hand more of their estate over to their children without having to pay Inheritance Tax.

Currently, an individual does not pay Inheritance Tax on an estate worth less than £325,000. This increases to £650,000 for couples.

However, the RNRB, something which former Chancellor George Osborne announced, means an end to Inheritance Tax on the family home for most of us. It is essentially an extension to the current tax-free allowance, but applying solely to property. It initially stands at £100,000, but will increase over the next four years until hitting £175,000 in 2020/21.

In order to qualify for the RNRB, the estate must include a qualifying property – basically a property that the deceased lived in at some point during ownership. That property must also pass to a direct descendant, such as a child or grandchild. Finally, the value of the estate cannot exceed £2 million. For every £2 over this limit that your estate is valued, the relief is reduced by £1.

It could save families a huge amount in tax. Things can, however, become complicated if the property is held in Trust.

Why hold a property in Trust?

Trusts can be very useful for people who want to cut their Inheritance Tax bill. By putting certain assets – like a property – into a Trust, they are not viewed as being part of your estate when the time comes to work out what Inheritance Tax your loved ones will have to pay.

While some forms of Trust will benefit from the RNRB, others will not.

The RNRB will only be available with the following Trusts:

  • A Bare Trust for a lineal descendant
  • An Immediate Post Death Interest Trust for a lineal descendant
  • A disabled person’s Trust for a lineal descendant
  • An 18-25 Trust
  • A bereaved minor’s Trust.

Other Trusts will not benefit, for example if the property is left to a basic Discretionary Trust, RNRB will not be available, even if the beneficiaries of the Trust are a lineal descendant.

So how do we maintain the flexibility and protection that a Discretionary Trust offers whilst ensuring that our clients do not miss out on the RNRA?

One less reported aspect of the RNRA and its impact, is how the Trustees can benefit from a strategy in a little known section of the Inheritance Tax Act 1984 (Section 144) which gives the Trustees the power to make their choice later, and decide who is best to inherit within two years of a death. Two years to pick and choose the best person to receive this new RNRA allowance, that person most likely being the youngest member of the family.

But what if the Trustees forget?

Some clients choose their Spouses to be their Trustees, others choose their children and some may pick “John” from down the pub. Are these Trustees likely to know that they have two years to jump into action, probably not?

So we shouldn’t risk using Discretionary Trusts, hoping that the Trustees will miraculously remember to do their job? There is much merit in that argument.

The New Flexible Family Trust

What if we were to offer a Discretionary Trust that means our clients do not have to “speculate” who would be the best person to receive the RNRA at the time they make their Will? A Trust that gives the Trustees a chance to choose the best person at the date of death, BUT also ensures that if the Trustees neglect to do so, the allowance will be received REGARDLESS by default in the terms of the Trust.

We therefore present the
NEW FLEXIBLE FAMILY TRUST!

Our new Trust ticks all of the boxes. The flexibility within two years of death to “pick the right person” but also with the security in knowing that if the Trustees are “sitting on their hands”, the trust defaults for them, ensuring that the relief is never lost.

Jon O’Brien from Finance North Estate Planning Services says: “Working out exactly who should get what after you pass away takes a lot of thought and planning. Getting a comprehensive Will in place is crucial. Please come and speak to us today on 0161 771 2056 to receive expert advice.”