Preserving Your Family Wealth: Trusts

Preserving Your Family Wealth p header image showing family 17th November 2023

Have you considered preserving your family wealth?


It is a common occurrence in times of economic uncertainty, most recently the COVID-19 pandemic and the 2008 financial crisis, that asset valuations slump. In recent weeks, there has been widespread concern about the economy and in particular the housing market, with the volume of transactions and prices slumping noticeably. These events can be unnerving, especially if it is the first time your asset portfolio has reduced in value, but could a reduction in asset valuations present an opportune moment to consider or review a trust structure?


About Trusts

Trusts along with other structures have, for many years, been considered an effective tax planning and family asset protection tool in an advisor’s arsenal, and with some asset classes slumping now could be a good time to consider creating a trust or reviewing your existing trust arrangements.


When an asset is settled into a trust structure it is usually classified as a chargeable transfer that is immediately chargeable to Inheritance Tax.  However, provided that the settlors full ‘Nil Rate Band’ is available, assets with a market value of up to £325,000 can be settled without incurring an Inheritance Tax charge. This figure increases to £650,000 if two settlors make a joint settlement.


Dependent upon the nature of the asset(s) transferred into a trust, certain reliefs are available that can be set against the value that is chargeable, such as Agricultural or Business Reliefs.


Most trusts, with a few notable exceptions, are subject to Inheritance Tax periodic charges when assets are appointed out to beneficiaries. As with the settlement of assets, these charges are based on the market valuation of the assets at the date of the chargeable event.


The settlement and appointment of assets is also a chargeable event for Capital Gains Tax, but in most cases, it is likely that ‘holdover relief’ will be available to avoid an immediate Capital Gains Tax charge by deferring the gain.


What To Do Next

If you are considering creating a trust arrangement, particularly in respect of overall estate planning, now may be the ideal time to consider advancing your plans to take advantage of depressed asset valuations. Equally, if you have an existing trust arrangement in place, now may be an opportune moment to review your trust, either by creating a trust which is fit for purpose for yours and your family’s circumstances, consider whether an existing trust has served its purpose, and appoint assets out of the trust.


Contact Us Today

If you would like further information or would like to discuss trusts, estate planning and/or tax compliance and advisory services in more detail, tailored to yours or your family’s personal circumstances and to consider the options available, please contact your local Whitings LLP office.

Disclaimer - All information in this post was correct at time of writing.
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