How can trust planning secure your family’s financial future?

Estate planning is a key part of the financial planning process. It’s all well and good having a plan for now, but knowing what will happen to your wealth in the future is just as important.

One element you may want to consider in your planning is using trusts. A type of legal framework, trusts can give you an additional layer of security and peace of mind when passing on money and assets, offering key benefits that can secure your wealth for your family’s future.

If you work with us at Britannic Place, we’ll have shown you how trusts can benefit you. But, if you’d like a refresher on how they work, or your circumstances have changed and you think using trusts could help, it’s important to be informed on what they can offer you.

So, find out how trust planning could allow you to secure your wealth for your family.

A trust ringfences money or assets for your beneficiaries

Let’s start with how trusts typically work.

When setting up a trust, you (the “settlor”) ringfence money or assets for certain beneficiaries, ensuring that only they can access this wealth at a specific time.

This can be when a beneficiary turns 18 and becomes financially independent, but there are many other circumstances when trust planning can be valuable.

You then appoint individuals, known as “trustees”, or a trustee company to oversee the trust after its creation. These trustees will have some key responsibilities to carry out, including:

Overseeing and managing the trust, treating all beneficiaries equally when doing so
Keeping accurate records, whether that’s bank statements, dividend statements, or even tax payments
Paying any tax due on the trust
Giving access to the beneficiaries at the appropriate time.
These responsibilities can be complex, so it’s important to select trustees who you’re confident will be able to deal with them. You can always pair them with a professional if you want them to have the support of an expert in managing the trust.

Protecting your wealth for your chosen beneficiaries

Often, one of the most common reasons for using trusts with your wealth is to protect it for your beneficiaries by controlling the ultimate destination of property.

For example, if there are individuals who think they may have a claim to your money, such as ex-spouses or stepchildren, putting money in trust means only your intended beneficiaries will have access to it.

This can be instrumental in making sure that your money and assets go where you want them to, no matter what happens to you.

Reducing tax

Another reason you may want to consider creating a trust is to reduce tax. Typically, you would do this in order to remove income, capital, or capital growth from your beneficial ownership, which in turn potentially reduces Income Tax, Capital Gains Tax, or Inheritance Tax (IHT).

However, the taxation of trusts can be extremely complex and the position has changed quite dramatically over recent times. Therefore, you should seek professional advice in relation to any trust planning and the taxation consequences.

There are various types of trusts

Of course, as alluded to above, there are various kinds of trusts, each with different purposes and uses.

The table below shows four of the most common kinds of trust, and how you can use them to help yourself and your family:

Source: gov.uk

Obviously, the best type of trust for you will entirely depend on your needs and personal circumstances. Speak to us if you’d like help choosing the right trust for you.

The Trust Registration Service deadline is in September

One key point to note with trust planning is the introduction of the new Trust Registration Service (TRS).

In the past, trusts typically only had to be registered with HMRC if there was a “taxable event” payable on it.

Under the new rules, any trust that is liable to pay certain taxes must be registered. This includes Capital Gains Tax (CGT), Income Tax, Inheritance Tax (IHT), Stamp Duty Land Tax (SDLT), and Stamp Duty Reserve Tax.

If you live in Scotland, this includes Land and Buildings Transaction Tax (LBTT), and Land Transaction Tax in Wales.

The TRS requires all trustees to provide details of the trustees, beneficial owners, and the assets contained within the trust to HMRC.

The deadline for registering trusts is 1 September 2022, with few exceptions. Failing to do so could see a penalty charge applied to the trust.

So, if any trusts you have or are planning to create meet the criteria for registration, then make sure you do so before this point to avoid any additional charges.

If you’d like help with this, please do get in touch with us.

Considering trust planning? Speak to us

If you want to find out how trust planning could help you to secure your wealth for those you most want to have it, then please do contact us at Britannic Place.

Email info@britannicplace.co.uk or call 01905 419890 to find out how we can help you.

Speak to us

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.