New research has found that an increasing number of people are using trusts to manage their financial affairs.
For people inheritance tax planning in Cheshire, Oswestry and elsewhere, trusts are seen as an important way of protecting assets and ensuring they can be passed on to the next generation.
In January, the Trust Registration Service approved approximately 10,000 UK-resident trusts but what is driving the trend, and what is the best way of establishing one? Setting up a trust can be expensive and needs to be done correctly and prudently. A trust is essentially a legal agreement that enables people with assets to preserve them and pass them on. Assets might include money, shares or property.
Trusts have become popular as a vehicle for minimising exposure to inheritance tax (IHT), particularly since the Government decided to include unspent pension pots within the inheritance tax pot from April 2027. IHT has turned into a significant issue for more affluent families, especially in situations where high property prices accumulated with lifetime savings incur hefty death duties. The advantage of a trust is that the assets they include are not subject to IHT, provided the trust holder lives for seven years after it was first set up.
It is important to be aware of forthcoming tax changes. From April 2026, the new £2.5million cap per person will restrict the amount of property that qualifies for inclusion in a trust without activating an IHT charge. More estates will also be caught in the IHT net because the £325,000 nil-rate band is not increasing with inflation whilst the threshold freeze is extended to April 2031.
