What types of Trust can we set up and advise about?
We can set up and advise about Lifetime Trusts to place assets in now and or to receive assets in the future.
We can set up and advise about Declarations of Trust relating to property and land.
We can prepare and advise about Wills which include Trusts to be set up following your death and which leave assets to Trusts that you or another person have already set up.
We can assist you with ensuring that life insurance policies and death benefits pass to a Trust in an efficient manner.
We can provide ongoing advice to trustees regarding their role as trustees and their options.
We can assist with matters such as changing Trustees, adding new beneficiaries where the Trust permits and updating letters of wishes.
We do not advise about Trusts where the person setting them up lives overseas and or where the assets to be held in Trust are overseas.
We do not advise about Charitable Trusts. We can advise about non-charitable Trusts which include charities or charitable organisations as potential beneficiaries.
The types of trust that we set up include:
Bare trust: This is a very simple trust where an asset belongs to someone but is held in another person’s name to be passed on to the beneficiary when it is appropriate to do so. This trust is most commonly used to hold assets on behalf of younger beneficiaries, to be passed on to them once they reach the age of majority which in England & Wales is the age of 18.
Interest in possession trust: This is a trust where assets are held for the benefit of one person until a certain event occurs when the trust assets pass to another person or group of people. Often assets are held for one person to benefit from for their lifetime. The initial beneficiary receives all net income from the trust and can use trust assets, for example living in a property held by the trust, but they cannot ‘access the trust capital or assets which are protected for the person or people who will receive them when the initial beneficiaries interest ends. This can be useful to provide a home and or income for a beneficiary whilst ensuring that the trust assets eventually pass where the person who set the trust up chooses.
Discretionary trust: This is a trust where the trustees hold the trust assets with the power to choose how and when to use income and or capital for the benefit of any one or more of a group of potential beneficiaries. The potential beneficiaries can include named individuals, groups of people (such as a person’s descendants) and organisations such as charities. This type of trust is often used to limit the access of a person deemed irresponsible with money or otherwise unable to handle the responsibilities of an inheritance, so that the assets can be safely preserved and passed on to future generations.
Mixed trusts: Mixing elements of different types of trusts can be a very effective way to arrive at a solution that’s just right for you, though you will need to bear in mind that each element of it may be subject to different tax rules.
There are different rules and tax exemptions if the trust is set up to benefit a vulnerable person or to take care of someone with a disability or medical condition.
A trust can be tailored to meet your specific needs, and how exactly your trust functions is something you will be able to decide with the help of your solicitor.
How do you set up a Trust?
To set up a lifetime trust you will need to have a trust document drawn up and signed by the person setting the Trust up (the Settlor) and the people being appointed to manage the trust (the Trustees).
We will take your instructions and advise you regarding the different types of trust following which we will prepare the trust document for you to consider. If required, we will also provide a letter of instructions to the present and future Trustees setting out your wishes and aims for the trust.
When the trust document is complete you will need to transfer the assets being placed in the trust to the Trustees. Elite Law can assist with the transfer of property and land to the Trustees. If money is being transferred to a trust the Trustees will need to open a trust bank account to hold that money. If investments are being transferred to the trust we recommend that the Trustees seek independent tax and financial advice.
Once a lifetime trust has been set up it will need to be registered with HMRC’s Trust Registration Service which must be kept up to date. If required, we can complete that process for you.
To set up a Will trust we you will need a Will which incorporates all of the terms of the trust and, where appropriate, a letter of instructions to the present and future Trustees setting out your wishes and aims. Will trusts only come into existence after the death of the person who made the Will so there are no further formalities for the person making the Will.
Passing assets into a trust during your lifetime is an irrevocable decision, meaning you cannot dissolve the trust and reclaim your assets. It should therefore only be done once you are absolutely certain of your decision, and the trustees, beneficiaries and terms should both be decided upon carefully.
What do I need to consider before setting up a Trust?
There are a number of important things to consider before setting up a Trust which include:
- The tax implications of setting up the trust and the ongoing taxes
- The costs and work involved in setting up and running the trust
- Identifying the assets to be placed into the trust
- Deciding who you will appoint as trustees
- Deciding who will benefit from the trust and how and when they will benefit
What tax implications do I need to consider?
When you transfer assets to a trust during your lifetime you will need to consider inheritance tax and capital gains tax.
If you transfer assets in excess of the Nil Rate Allowance (£325,000) into Trust in any seven year period during your lifetime, the amount in excess of the allowance is subject to inheritance tax at 20%. If you die within seven years of the transfer further inheritance tax at an additional 20% will become due.
A transfer of assets into a trust is a disposal for capital gains tax purposes and therefore if the assets that you are transferring into trust during your lifetime have increased in value since you acquired them that uplift in value will be subject to capital gains tax. We can give you and overview of the capital gains tax position however for a precise calculation you will need to consult an accountant.
On your death any gifts, including transfer of assets into a trust, made in the seven years prior to your death will be taken into account in calculating the inheritance tax due.
Inheritance tax may also be due on assets held in trust when they are transferred out of the trust (exit charges) and on each 10 year anniversary of the trust being set up (periodic charges). This charge is a maximum of 6%.
The income and gains generated by trust assets will belong to the trust and will be taxed at trust rates and not at personal rates.
For more detailed advice regarding capital gains tax, the exit and periodic charges and the ongoing taxation of trusts we recommend that you seek specialist tax advice.
How much does it cost to set up a Trust?
Typically, we will charge around £1,500.00 – £2,000.00 plus VAT to advise you and set up a trust for you.
If the Trustees require ongoing advice and support our ongoing charges will be for time spent at our hourly rate.
Cost-effective Trust Solicitors
Our services are cost-effective and competitive, and we will always give you a clear indication of our charges. We are happy to provide one-off advice at certain points of the legal process or on particular areas of concern as they arise.
One of our experienced trust solicitors will have an initial consultation with you, free of charge, to discuss your situation in more detail.
Once we understand your circumstances better, we can provide you with a clearer understanding of how we can help you. We will also provide you with a price quotation and a choice of funding methods at the outset.
Contact our Trust Solicitors
Call 0800 086 2929, email email@example.com or complete our Free Online Enquiry Form to arrange a free, no-obligation discussion and let one of our experienced trust solicitors explain your legal rights and options.