Simpler Trusts.

What is a Trust?

Protecting your assets during your lifetime and beyond.

A trust is a legal arrangement created by you normally through a Will or a Trust Deed. You choose people or professionals, who are then subject to certain duties, to protect the trust assets for the use and benefit of others. Choosing the right trustees is vital. We offer a complete range of Trusts including the following:

Protective Property Trust
Flexible Lifetime Interest Trust
Residuary Discretionary Trust
Disabled Person's Discretionary Trust
Nil Rate Band IOU Discretionary Trust
Right to Occupy Trust
Business Property Relief Protection Trust
Asset Protection Trust

Different Types of Trusts.

Here's a brief explanation of Trusts, relevant to Estate Planning and how each can be a powerful benefit.

PROTECTIVE PROPERTY TRUST

Where a property is held jointly as Joint Tenants, it will pass outside of the deceased's estate and to the surviving tenant. By changing the joint ownership of the home to Tenants in Common the deceased's share of the property now passes into their estate to be included in their Will. The Will then directs that this share of the property is passed into a Protective Property Trust. This trust then ensures that the following will happen: A Life Interest in the share of property is given to the surviving spouse or partner The trust protects the assets from any third-party claim, which means;”. The ultimate beneficiaries are guaranteed to benefit and receive their share The ultimate beneficiaries are guaranteed to benefit and receive their share
FLEXIBLE LIFETIME INTEREST FUND

Very simply a FLIT is similar to a Protective Property Trust but allows the life tenant access to the capital and not just income Married couples often make use of a FLIT where they have an Inheritance Tax liability but do not want to give away assets prior to first death. If the survivor’s estate is liable for IHT on their death, they could choose to gift assets, including those held by the trust, to reduce the value of the estate. Such gifts would be potentially exempt transfers and subject to the seven year rule.
RESIDUARY DISCRETIONARY TRUST

Often used by those wishing to exercise more specific control of their estate This may be due to concerns over their chosen beneficiaries' personal circumstances If the survivor’s estate is liable for IHT on their death, they could choose to gift assets, including those held by the trust, to reduce the value of the estate. Possible divorce Possible bankruptcy Alcohol, drug or gambling addiction Ill health or incapacity Loss of necessary benefits Potential Inheritance Tax liability Just want to ‘control from the grave’
DISABLED PERSONS DISCRETIONARY TRUST

Protects the ongoing receipt of means tested benefits Trustees look after the interests of those who are incapable of managing own affairs Although there can be another beneficiary named in the trust, in order for the trust to qualify for beneficial Inheritance Tax treatment, all payments must be made to the disabled person, except for small allowable amounts. Any income received within the Trust benefits from a reduced rate of income tax, rather than the usual higher rate applied to trusts.
NIL RATE BAND IOU DISCRETIONARY TRUST

Essentially used to reduce a potential IHT liability Especially useful for unmarried couples Allows surviving partners to ‘borrow’ from the trust, interest free Can be used by widows who have acquired a transferrable Nil Rate Band The IOU debt can effectively benefit generations for the perpetuity period of 125 years
RIGHT TO OCCUPY TRUST

Allows someone to live in a property for a set period of time only This Trust must be limited to a Right to Occupy only, without any further rights Typically used for children still living at the parents' home or to allow a 'new' partner time to find alternative accommodation
BUSINESS PROPERTY RELIEF TRUST

The Trust is written to receive shares / qualifying assets of a business The beneficiary of the Trust can sell the assets within the Trust essentially 'preserving' the Business Property Relief This Will Trust should be considered where the Testator has any kind of business assets Should the business no longer qualify for BPR, or indeed has long since been sold or liquidated, then the Trust would simply never come into effect
ASSET PROTECTION TRUST

Created during your lifetime with an immediate transfer of assets to the trustees You retain rights to enjoy the property in Trust for the rest of your lifetime Assets are then passed to your chosen beneficiaries via a Discretionary Trust. This gives maximum asset protection and flexibility to suit your beneficiaries' individual circumstances

For more detailed information about Trusts view or download our dedicated Trusts Brochure.

The Role of Trustee.

Professional Trustee Services

A Trustee owes fiduciary duties to the beneficiaries. These duties are typically set out in the Trust Deed or provided by Statute. The main duties are; Duty to the Terms, Duty to Loyalty, Duty to Manage the Trust Effectively, Duty to Act Personally, Duty to Consider the Beneficiaries, and Duty to Account.

We recommend appointing a Professional Trustee who will take on the liability and responsibility for complying with the complex Trust legislation. Our sister company, Fidelis Legal Services Limited are Professional Trustees and manage around £600,000,000 in Trust assets for our clients.

In choosing Fidelis Legal Services there is the additional reassurance that it is not a single individual acting as Trustee, but a limited company with the responsibilities and protections this provides. This also means that there is always someone available to act as the Trustee, unlike if an individual is appointed.

What a Trust can and cannot do.

What does a Trust do?

A Trust protects your property and other assets from side-ways disinheritance.
A Trust allows you to set restrictions on when your beneficiaries inherit.
A Trust allows you to leave instructions on how your estate is to be managed by your chosen Trustees after you pass away.
A Trust can include restrictions to ensure that a vulnerable beneficiary is protected. This can include:
- Ensuring means tested benefits are not lost through a beneficiary receiving a large lump sum.
- Delaying an inheritance until a beneficiary is free from an addiction.
- Protecting estate funds from a beneficiary’s abusive, controlling or unsuitable partner.
- Delaying the inheritance to a beneficiary who is bankrupt until such a time that they are discharged.

What a Trust doesn’t do.

When planning for your Trust there are a couple of popular misconceptions to consider, alongside the many great benefits they provide.

The first misconception is that you can use a Trust to avoid paying for care home fees. Trying to avoid your property being part of a means tested assessment in this way is known as a Deliberate Deprivation of Assets and we do not advocate this practice, through Trusts or other means.

There is also a misconception that putting your assets in a Trust makes them immune from Inheritance Tax. This is not the case in a trust where you continue to benefit from the trust asset in any way. There may be ways to reduce your Inheritance Tax liability, and our advisors offer the most suitable options tailored to each clients’ requirements.

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