Trusts: Tax Planning and Asset Protection

8th July 2024

Have you considered trusts when it comes to tax planning and asset protection?


The Purpose of Trusts

Whilst trusts were created during the 12th century to protect the assets and interests of the nobility, these days their use is no longer restricted to higher society. Today, trusts serve the same purposes as they did then; ensuring that wealth and assets pass in accordance with an individual’s wishes and have long been used by private client advisors as a tax planning and family asset protection tool.


Trusts and Asset Protection

Trusts provide a desirable combination of flexibility and protection, with a well drafted trust deed being able to name a wide class of beneficiaries who can benefit. The trustees (who administer the trust for the chosen beneficiaries) can then be given the power to choose how income is directed, without passing them the underlying capital. This gives the trustees the power to pass funds to beneficiaries who might need it for significant life events, such as a house deposit or tuition fees, whilst allowing them to control their spending, preventing them from squandering their inheritance.


Trusts and Tax Savings

A properly structured trust arrangement can present tax savings too, with the Inheritance Tax ‘nil rate band’ of £325,000 quickly being swallowed up by property valuations in the capital and East of England. However, whilst there is no Inheritance Tax charge on death, a discretionary trust will be caught by the so called ‘relevant property’ regime and be subject Inheritance Tax charges of up to 6% on the trusts’ ten year anniversaries or when assets leave the trust.


Get in Touch

Although trust planning has become more complex as successive governments have attempted to close perceived loopholes in the legislation, they are still, overall, a very powerful tool for tax planning and asset protection. Despite the fact that there may be some additional administration associated with a trust, it is usually worth it for the peace of mind of knowing that family assets are protected.


Our private client team includes specialists in trusts and Estate planning and management. For more information advice or guidance, contact your local Whitings LLP office today and our team will assist you.


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