Connect with HW Fisher

Trusts and keeping wealth in the family

Created: May 2017

For the average person, the sums reported in the annual publication of the Sunday Times Rich List are beyond imagination.

But the wealth reports aren’t always true, especially for the “old money”. One thing that is seen again and again is the use of family trusts. It may sound rather esoteric but it is a common tool that any proficient private client adviser should be able to explain and, subject to certain limits, use to your benefit.

I say “Private client” and not “Tax” adviser deliberately. It should be remembered that trusts pre-date tax by over 500 years.

They may have started as ways for the nobility to protect their assets, but these days they are certainly not restricted to the Landed Gentry of this world. Today, trusts can serve the same purpose as they were originally intended – making sure that your money passes to those you want it to.

The usual time to create a trust is in your Will, although they can be created during your lifetime as well.

Trusts can ensure that the funds pass correctly and control how much the beneficiaries spend. This can also prevent your children or grandchildren squandering their inheritance should they inherit younger than you might hope. There may be some extra paperwork involved but it should be a small price to pay for peace of mind. Properly structured, there shouldn’t be much difference for income tax and Capital Gains Tax purposes.

There certainly can be some Inheritance Tax savings when trusts are used appropriately and the Nil Rate Band of £325,000 is easily used up and surpassed with South East property values.

But one quick word of warning. Although Discretionary Trusts do not suffer Inheritance Tax on anyone’s death, there is a charge of up to 6% every 10 years.

Trusts can be powerful planning tools but they are not a universal panacea and not the only game in town – other options could include Family Investment Companies or Partnerships. They are also certainly not the preserve of only the rich.

For more information about how trusts might benefit you, please contact:

Tim Walford-Fitzgerald CTA, Private Client Partner
T 020 7380 4927
twfitzgerald@hwfisher.co.uk