Cedar Wills & Trust’s dedicated team take the time to understand your needs to establish future proof trusts. A Trust can be a tax-efficient way of benefiting someone in the future and can be arranged to deal with a vast range of circumstances.
TYPES OF TRUSTS
HOW CAN AN ASSET PROTECTION TRUST HELP ME?
Many people will draft a Will to ensure that all their assets are passed onto their children and chosen beneficiaries after their death. However a Will can only distribute the assets you own at the time of your death, so if your assets have been depleted over the years, there will be little left for your beneficiaries.
Family Asset Trusts, are designed to protect assets during your lifetime and will give you peace of mind that they will be passed to your beneficiaries after your death. Think of a Family Asset Trust as a ‘safe’, it ring-fences your family home, other property, bank accounts, stocks and shares, jewellery, fine art, business and agricultural assets, bonds and investments, cars and any other assets you decide to place in it. The primary advantage of an asset protection trust is that it can help ensure that more of the wealth you have amassed throughout your life is left to your beneficiaries and not wasted on unnecessary costs.
The person setting up the Asset Trust is known as the settlor, and it is run and controlled by trustees. Dependant on trustee approval, you are free to move home, release equity from the Trust at any time or change your mind at any time in the future.
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Claims on your Estate
All assets within the trust are safe from any claims. This means that ex-spouses, distant relatives etc would not be able to make a claim on your estate upon your death. Cedar Legacies team take the time to understand your unique circumstances to provide peace of mind now and in the future. Cedar Legacies are dedicated to protecting your estate and what is important to you… Don’t leave your estate in a state.
Protection from means testing
We are often asked by our clients whether taking out an asset protection trust can protect against care home fees. By far the biggest fear is that their home will be sold and they are left with very little to pass on to loved ones. If you need residential care in later life you can expect to pay for all the costs. You may therefore have to sell assets, such as your home, to pay for your care. If you have already placed your house into a trust, it is likely that you can mitigate fees towards your future care costs. We would need to conduct a full assessment of your circumstances to ensure that we provide you with accurate advice based on your needs.
Avoid Sideways Disinheritance
Most married couples leave all their assets to the surviving spouse in the event of their death and then the children if they are the only parent alive. If then the surviving spouse remarries have you wondered what happens to the joint assets? Under standard inheritance law, the balance of your estate would pass over to the remaining spouse and the children would not receive their rightful inheritance. The assets could then pass on through to the new spouse’s family. By putting all your assets in a trust and designating the intended recipient/s, it does not matter which spouse dies first or what situation the surviving partner is in.
How can this Trust help You?
The Flexible Life Interest Trust (FLIT) has been described as the ‘ideal modern Will’. In today’s modern life of more complex estates and greater wealth, it is essential for the testator’s to have greater flexibility as to how their estate will devolve when they die. A well planned and drafted Will should be able to cope with changes in the future to the family structure and this includes the addition of new family members and changes to the tax regime introduced from time to time.
The main way to achieve maximum flexibility is through the use of Will trusts, whether they are discretionary; giving power to the trustees to make decisions of a named group or ‘class’ of beneficiary without having to ensure equality amongst them or interest in possession trusts giving the beneficiary a life interest in the trust assets rather than an outright gift.
- Once the FLIT is terminated, the benefits of a discretionary trust arise which also gives a great deal of flexibility to the surviving children or other named beneficiaries who can all potentially benefit from the discretionary trust and are also likely to maintain control of the trust as named beneficiaries.
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For the FLIT to be effective all jointly owned assets will need to be held as tenants in common; i.e. effectively equalising the estate as far as possible. But it can also be equally effective where one party owns significantly greater wealth than the other. Unlike a normal life interest trust where the trustees are limited to the advancement of income only, the FLIT can ensure that the survivor’s needs are provided for by the advancement of capital as well as income.
- Land, buildings, plant or machinery which is used by a company controlled by the owner or by partnership in which the owner is a partner.
- If your business assets qualify you must carefully consider who is going to inherit. You may wish to leave your business interest to your children or spouse but:
- You are concerned about their ability to deal with the asset? or
- Wish to undertake some IHT planning for their estates?
The solution would be to use this Trust within your Will; through such planning the relief can be maximised.
Leave any qualifying interest in a business straight to your spouse can lead to 40% IHT on their death if they decide to sell it as the cash proceeds will form part of their estate. Wasting the relief! Abetter route would be to leave your assets which qualify for BPR to a discretionary Will trust: if the interest is then subsequently sold, the cash proceeds of sale would be kept outside of the estate of the surviving spouse as they belong to the trust and will not form part of their estate and won’t be subject to IHT on the spouses’ death. Instead your spouse and children or family members are beneficiaries of the trust and can have access to the cash proceeds. The tax saving would be 40%.
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As the business assets are placed into trust, should the assets be subsequently sold, the cash proceeds will not form part of anyone’s estate at all, and shall instead be subject to the low IHT rates applicable to trusts.
A way of placing valuable assets outside your own taxable estate and down to the next generation with little or no tax.
Where possible, your Will should be structured in such a way so that assets qualifying for BPR are left to non-exempt beneficiaries (i.e. taxable beneficiaries). Otherwise, the relief could be wasted.
How can this Trust help You?
Do you have a family member who is mentally/physically handicapped? Your care for him/her is hugely important and this needs to be considered when you are no longer around. This trust will enable you to leave your assets in a controlled settlement, with people who will have the ability to make all financial decisions for them. There are huge disadvantages in gifting assets to a disabled child/person and this Trust helps avoid many of them.
Leaving a simple Will in the hope that ‘everything will be alright’ can have a disastrous effect; this gives us a list of the disadvantages of not using this Trust:
- Benefits from the Benefits Agency being stopped.
- Entitlement to Local Authority funding being stopped.
- A Receiver from the Court of Protection having to be appointed to manage the affairs of the disabled person. This can be very expensive and may not act as you or the disabled person may want them to.
- The estate being subject to a much harsher tax treatment.
Explore the benefits of having a disables trust in place below. Your dedicated Cedar Wills & Trusts advisor is available to help you navigate each stage of the process, providing the latest advice, future proofing your protection. Schedule your confidential consultation today.
Including this trust within your Will can ensure that you make provisions for added luxuries and extras that you would want your disabled child (family member) to have e.g. holidays, particular equipment to help enhance their way of life.
This Trust enables you to secure the future of your disabled family member who is unable to look after their own affairs and to protect them.
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You can leave a Letter of Wishes* to the Trustees to explain why you have set up the Trust and what you would like to achieve including explanations as to what the money should be spent on.
Trustees have discretion; which means that they can adjust to deal with the affairs of the disabled person and his/her changing circumstances e.g. money required for the payment of medical bills. The Trustees also have the ability to adapt to a change in legislation that we cannot predict.
The Trust enables you to give the Trustees the ability to give your family member the best possible care and to make arrangements for their future so their lives can be enhanced and the quality can be maintained
Right to Occupy
How can this trust help me?
It is not uncommon to have a member of your family living at your home. This can include an elderly relative or your eldest child, either way, if you die they may need your protection to allow them to remain in the property.
Setting up this trust can give them the right to keep residing there. This can be for a specified number of years, for life or until the individual no longer requires to remain e.g. ceases to use the property as their main residence. This protection can only be given by this Trust.
A right to occupy (reside) can also help your children’s guardians, by giving them the right to live in your home while bringing up your children BUT knowing that when say, your youngest child attains the age of 18, 21 or 25 the trust will end. When this occurs the guardians revert back to their own property allowing the family home to be passed onto your children.
Once this Trust has come to an end the named beneficiaries will then receive the house just as if it was gifted straight to them. This is usually children, family members etc. however if no-one is mentioned within the Trust the house will then return to the residuary estate leaving it as per your intentions within your Will.