Trusts, Tax & Asset Protection
At LCF Law we specialise in the provision of tailored advice to help ensure that the wealth you have created passes on to the people who are most important to you and doing so in the most tax efficient manner.
What is a trust?
A trust is a means to protect wealth and pass assets in a more controlled manner than giving outright to those persons. It is a means of separating the ownership and the control of the assets (such as land, property, money and investments).
The trust structure has been around for generations and it continues to be relevant and useful in the modern world today. A trust can be created during lifetime or on death.
The ‘settlor’ is the person or persons who puts assets into a trust. The ‘trustees’ are the people who hold and manage the assets on behalf of the ‘beneficiaries’, who are the persons entitled to benefit from the trust. The extent of the beneficiaries’ entitlement depends on the nature of the trust in question.
There are various types of trusts, and they are taxed differently. The main types of trust are:
- bare trusts
- interest in possession trusts
- discretionary trusts
- accumulation trusts
- mixed trusts
- settlor-interested trusts
- non-resident trusts
Why create a trust?
Many people think that trusts are created simply to avoid or to reduce tax. There are, however, many different reasons for creating a trust, for example, to:
- Provide for family members or future generations in a more controlled manner than an outright gift.
- Safeguard wealth eg. against a risk of divorce or insolvency.
- Benefit future generations in a tax efficient manner.
- Provide for vulnerable people who might not be able to deal with the financial responsibility of looking after the money if you gave it to them personally.
Assisting you throughout the lifetime of a trust.
LCF Law can help guide you through each of the three main stages in the lifecycle of a trust covering all the elements involved to do with the creation, management and administration, and termination of a trust.
Creation of a trust
We can help you to create a trust, whether by deed during your lifetime or by your will, which only takes effect on death.
There are many reasons for creating a trust. We will listen to your priorities and provide clear and straightforward advice as to the best way forward to take account of your particular wishes and circumstances. The most common trusts created during a lifetime are:
- Life interest trusts – this form of trust allows a person to benefit whilst they are alive; however, when they die, the assets pass in accordance with the trust deed. The person can receive the income from the assets and live in a property whilst they are alive, however, they do not own the assets themselves. This trust structure is often included within wills to ensure assets ultimately pass down the family line. This form of trust can be useful where there are second or third relationships with different interests to manage and care for.
- Discretionary trusts – these are flexible arrangements whereby the trustees decide which of the potential persons named in the trust deed will benefit, and when and how. The trust is typically accompanied by a ‘Letter of Wishes’ which sits alongside the trust and sets out how the trustees should exercise their wide discretion.
- Pilot trusts – these are trusts created during lifetime with a nominal amount; with the intention that a larger sum will be paid into the trust on death. There may be good reasons (tax and planning) as to why you wouldn’t want someone to receive a large lump sum of money on death (eg. from a life insurance or death in service policy). You may prefer to have more control in place and pay the fund into a separate pilot trust. There are also inheritance tax advantages for life insurance to be held on trust so it does not form part of your estate on death – this can achieve a significant inheritance tax saving.
- Bare trust – this is a simple trust structure whereby the trustees hold assets for the beneficiary outright. Typically these are used if you want to make an outright gift to someone who is under the age of 18 – so someone else can hold the assets on their behalf until they are legally able to hold assets in their own name.
- Property co-ownership trust – if you own a property with someone it is always advisable to have a ‘declaration of trust’ in place to confirm the arrangement with regard to the underlying ownership to protect everyone’s interest. This can be particularly relevant where one person has contributed more than the other. It will not change the day-to-day ownership but has the benefit of each person knowing where they stand when the property is ultimately sold.
- Charitable Trust –– a trust established for charitable purposes. These benefit from generous tax exemptions and are subject to additional regulation by the Charity Commission.
- Vulnerable persons trusts – please see our dedicated page on Vulnerable Beneficiary Trusts.
Trust management and administration
Our lawyers can assist new and existing trustees in their day-to-day role in managing the trusts they are responsible for. This can include:-
- Advising trustees as to their powers and duties under trust law and the provisions of the trust;
- Liaising with beneficiaries regarding their entitlement under the trust;
- Arranging and attending trustee meetings;
- Helping trustees to choose appropriate investment advisors;
- Providing assistance where one of the trustees has died, wishes to retire or has lost capacity;
- Assisting where an inheritance tax liability has, or is about to, become due and giving advice on the reporting and tax requirements;
- Assisting trustees when they wish to exercise their discretion under the trust provisions;
- Providing advice where conflict has arisen; and
- Providing advice if there is a concern regarding the management of the trust.
Termination of a trust
We have experience in bringing trusts to an end and advising the trustees and beneficiaries as to their tax position and reporting obligations when the trust ceases.
A collaborative approach to trusts and trust management
AT LCF Law we work in close cooperation with other professional advisors, in particular accountants and IFAs, to ensure the family’s aims are met.
Many of our solicitors are STEP qualified and are experts in this field.
The Society of Trust and Estate Practitioners (STEP) is the worldwide professional body which promotes high professional standards and education for its members. Becoming a Full STEP Member is a benchmark many solicitors strive for: it is the top professional qualification for a wills, trusts and probate solicitor.
Call Us Now
Our solicitors are ready to help you. Click on Contact Us, use the Contact form above, or send a message direct to one of the team working in this area from their business cards below.
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- Ann Christian
- Partner
- Wealth, Inheritance & Estates
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- Neil Shaw
- Head of Personal Law
- Wealth, Inheritance & Estates
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- Hana Gwyn
- Partner
- Wealth, Inheritance & Estates
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- Clare Wicke
- Solicitor
- Wealth, Inheritance & Estates
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- Jennifer Lee
- Associate
- Wealth, Inheritance & Estates
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- Fiona Briggs
- Probate Assistant
- Wealth, Inheritance & Estates
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- Nicole Narey
- Solicitor
- Wealth, Inheritance & Estates
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- Jemma Hobson
- Solicitor
- Wealth, Inheritance & Estates
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- Liam O’Neill
- Partner
- Wealth, Inheritance & Estates