If set up at the right time and for the right reasons a Family Trust can shelter property and other assets from means tested benefits including long term care. The law and rules are complicated and constantly changing and you must take care to ensure your planning complies with known current and potential future rules.
Trusts have been used for hundreds of years to protect family wealth to ensure that it remains within your family “bloodline for many generations to come. A Family Trust can mitigate or completely avoid the need for probate (saving on average about £8,000) and avoid many other threats to passing wealth down to your chosen beneficiaries and down their bloodline.
Other things to think about...
Some of the questions that we can answer for you:
- How would you feel if you had to pay Inheritance Tax unnecessarily?
- How would you feel if you unnecessarily placed burdens and costs on your loved ones?
- How would you feel if you lost your inheritance to pay for care home fees?
Trusts and Estate Planning that puts you in control
It is the most natural desire in the world – to pass on your hard-earned assets to your family and loved ones. But before that is possible there are unexpected complications, legal costs and delays, tax authorities, potential future relationships, former in-laws, creditors and local authorities eyeing up your assets – especially your home.
We now have far more assets than ever before and at the same time families have become increasingly diverse and complicated. The threats to passing assets down to our chosen beneficiaries have increased dramatically; 100 years ago divorce and re-marriage was rare and people retired at 65 and rarely went into care homes. This combination of increased personal wealth, together with the new threats modern society brings, means that estate planning should be a vital part of your financial planning toolkit.
Simply having a basic Will is no longer enough as it is not likely to achieve your wishes.
Trusts are not new; they have been used for over 600 years to protect and preserve family wealth within traditional estate planning structures. Trusts are now available for everyone wanting to protect and preserve their assets for their loved ones.
There are two main types:
Will Trusts are only set up on death. Most modern Wills have Trusts in them, the most common types used are:
- To protect your home from sideways disinheritance
where your children could be disinherited.
- To protect children’s inheritance, whilst still allowing
access to funds.
- To mitigate Inheritance Tax.
- To protect disabled beneficiaries means tested benefits.
- To protect your home from care fees.
A Family Trust is set up now and assets are transferred into it (but you retain control and access). It is used to protect your wealth from a number of threats and ‘what-ifs’. The principal benefits include:
- Avoiding probate costs (average £10-15,000).
- Avoiding probate delays (average 6-9mths).
- Protection against sideways disinheritance.
- Protection in the event of the early death or divorce of a beneficiary.
- Protection against a beneficiary’s financial hardship.
- Avoidance of Inheritance Tax in beneficiary’s estates.
- Protection against an excluded or unreliable beneficiary.
- Protection from creditors / means tested benefits.
- Maximum protection with complete flexibility.
- Protection against Care Fees if done at the right time and for the right reasons.
Basic Will v Will Trust v Family Trust
|Benefits||Basic Wills||Will Trusts||Family Trust|
|Avoid the additional cost and delay of intestacy||Yes||Yes||Yes|
|Appoint Executors & Trustees of your choice||Yes||Yes||Yes|
|Appoint Guardians of your choice||Yes||Yes||Yes|
|Ensure your inheritance wishes are respected||No||Yes||Yes|
|Avoid post first death sideways disinheritance||No||Yes||Yes|
|Delay children’s inheritance to appropriate age||No||No||Yes|
|Avoid probate costs of about 2%||No||No||Yes|
|Avoid probate delays of about 9-12 months||No||No||Yes|
|Avoid Inheritance Tax in beneficiaries estates||No||No||Yes|
|Avoid dilution of family wealth in the event of beneficiary’s financial hardship or insolvency||No||No||Yes|
|Avoid sideways disinheritance if a beneficiary divorces or dies early||No||No||Yes|
|Avoid dilution of family wealth in the event of unreliable beneficiary or challenge to Will||No||No||Yes|
|Protect beneficiary’s means tested benefits||No||No||Yes|
|Protect wealth for up to 125 years (for the next 4 or 5 generations)||No||No||Yes|
|Provide maximum protection and flexibility to adapt to changes in circumstances||No||No||Yes|
|May mitigate social care fees after first death*||No||Partial||Full|
*Only likely to be effective if social care is not foreseeable when trust is created and the purposes the trust is being set up does not include avoiding care fees i.e. deliberately deprive the LA of assets.
“Our consultants expert advice and guidance, clear explanations and flexibility around meetings helped enormously in making important decisions.”
Mr & Mrs T. London