Why consider a trust?

If you want to mitigate the effects of Inheritance Tax (IHT) on your estate, trusts can be an important part of the process. When you put cash, property or investments in a trust, provided certain conditions are satisfied, you don’t own it any more. This means it might not count towards your IHT bill when you die.

Although trusts can be a cornerstone of effective estate planning, they are complex and there are a number of different ones available. For this reason, it is important to seek professional advice.

What is a trust?

A trust is a way of managing assets for people. They can be seen as a protective shield for your assets and can be established on death or during your lifetime. One of the advantages of setting a trust up in your lifetime is that you can influence who manages the trust, who benefits and when.

It is a legal arrangement where you give cash, property or investments to someone else so they can look after them for the benefit of a third person. So, for example, you could put some of your savings aside for your children.

There are three categories of people involved (there may be more than one of each):

Trustee – this is the person who owns the assets in the trust. They have the same powers a person would have to buy, sell and invest their own property. It’s the trustees’ job to manage the trust responsibly.

Beneficiary – this is the person who the trust is set up for – usually someone unable to manage it themselves. The assets held in trust are held for the beneficiary’s benefit.

Settlor – this is the person who establishes the trust and/or provides the assets within it.

If you would like more advice on your options for mitigating IHT, please get in touch to arrange a complimentary consultation with one of our award-winning advisers.


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