Trust planning for wealth transfer is frequently overlooked despite its significant benefits. This includes the strategic placement of investments or properties into a trust for a designated individual. The trust is overseen by trustees who adhere to the grantor’s directives.

There are good reasons to choose a trust for passing on wealth to your family:

  • Making sure assets go to the right people.
  • Lowering possible Inheritance Tax (IHT).
  • Smoother asset transfer.
  • Having more say in how assets are used.
  • Creating a legacy for future generations.
  • Reducing the chance of assets leaving your family’s possession.

Despite the mentioned advantages, research indicates that many people who could benefit from using a trust are not doing so.

The majority of life insurance is not placed in a trust despite the advantages

According to Royal London, families are frequently recommended trusts by financial planners. Yet, few are following the advice offered.

For example, only 3 out of 10 individuals with term life insurance have chosen to put it in a trust. This insurance pays out a lump sum to your chosen beneficiary if you pass away during the policy term.

By placing your life insurance in a trust, you ensure that the payout goes directly to the person you want. If life insurance isn’t placed in a trust, it might be seen as part of your estate for Inheritance Tax (IHT) purposes. This could lead to an unexpected IHT bill that you hadn’t planned for.

Moreover, when a life insurance policy is placed in a trust, the payout doesn’t have to go through probate. This means your family gets the money faster, which can be crucial if they depend on your income for everyday needs.

On the other hand, the survey shows that simpler options are more popular. This could mean families are missing out on trusts, perhaps because they don’t fully grasp how they function.

Why are you considering a trust?

Deciding which type fits your aims is crucial. Whether it’s safeguarding assets for a grandchild until they grow up or ensuring a steady income for future generations, clarifying your goals helps in choosing the right trust.

Do you want to benefit during your lifetime?

Think about whether you want to receive benefits from the assets in the trust while you’re alive. This might mean getting income from investments held in the trust, which could help lessen future Inheritance Tax (IHT), and ensuring financial security if you’re unable to handle assets yourself.

Who are your intended beneficiaries?

It’s important to clearly identify who will benefit from the trust, as this choice shapes how the trust will work. Whether you want beneficiaries to access assets directly or prefer a consistent income for certain individuals, knowing their needs helps in structuring the trust accordingly.

Who will serve as the trustee?

Consider whether to choose someone you know personally, like a friend or family member, or opt for a professional trustee such as a solicitor, even though it involves expenses. Having open discussions with potential trustees helps ensure they understand their duties and align with your intentions.

Seeking professional help is often advisable if you want to set up a trust

It’s usually recommended to seek professional assistance when establishing a trust.

Once a trust is set up and assets are transferred, reversing the decision can be tough, if not impossible. That’s why getting professional support is really important.

As financial planner advisors, we can help you choose the best assets to put in the trust that match your goals and how they might affect your wealth. This support can give you confidence in your decisions.

Legal advice is also crucial in this process. Because setting up a trust can be complex, a solicitor can guide you through the details and help prevent costly mistakes.

Contact us to discuss if a trust could help you pass on your wealth

Understanding whether trusts suit your individual requirements and comprehending the necessary steps for their effective use can be complicated, even though they offer flexibility in various scenarios. Our team is available to provide customised advice that fits your situation. We can help you create an estate plan that matches your desires, including establishing a trust if it’s the right choice.

Please reach out to us to arrange a meeting where we can discuss the specifics of your estate plan. Your financial well-being matters to us, and we’re eager to support you in this process.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate trusts, estate planning, tax planning, or legal services.

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