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This information provides a clear explanation of trusts, how they work and their key benefits. We'll explore their role in estate planning, tax efficiency and life assurance, ensuring you have the knowledge to make informed decisions.
What is a Trust?
A trust is a legal arrangement where trustees manage assets on behalf of beneficiaries. It ensures that assets are distributed according to your wishes, providing control and protection over how they are used.
What is a Trust?
- Settlor: The person who creates the trust and transfers assets into it.
- Trustees: Individuals appointed to manage the trust in line with its terms.
- Beneficiaries: Those who will benefit from the trust's assets.
You can place various assets into a trust, such as cash, property or life assurance policies. If the trust remains in place for seven years, the assets may no longer be considered part of your estate for inheritance tax purposes.
Speak to Abodo about arranging a financial trust for you or your family
Speak to our protection team to discuss your trust options. We will help you choose the most appropriate deal.
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Your Life Journey
Ongoing support beyond mortgage completion
Personalised Approach
Unique mortgage strategy for each client
Market Expertise
Comprehensive market research with Whole of Market lenders on offer
Transparency
Clear, jargon-free communication. Ask us anything at any point but we are confident we will have already covered it.
Your Life Journey
Ongoing support beyond mortgage completion
Why Use a Trust?
Trusts provide several key benefits, including:
- Greater control over how and when assets are distributed.
- Protection of assets from unforeseen circumstances.
- Estate planning advantages, such as expediting probate.
- Tax planning opportunities, including potential inheritance tax reduction.
Trusts and Life Assurance
Trusts are commonly used to hold life assurance policies, ensuring proceeds are distributed efficiently and tax-effectively.
Benefits of Placing Life Assurance in a Trust:
- Avoiding probate delays: As the trust owns the policy, payouts are made directly to trustees, bypassing the probate process.
- Potential inheritance tax savings: Proceeds are usually excluded from your estate, potentially reducing tax liabilities.
While life assurance trusts provide tax advantages, the trust itself may still be subject to other forms of taxation.
Appointing Trustees
Choosing the right trustees is crucial, as they will oversee and distribute trust assets according to your wishes.
Key Considerations:
- Typically, at least two trustees should be appointed.
- Trustees should be reliable and capable of managing the trust responsibly.
- You may step down as a trustee if you no longer wish to serve.
- If only one trustee remains, another must be appointed.
Trustees do not need special qualifications, but they must be over 18 and act in the best interests of the beneficiaries.
Selecting Beneficiaries
You can nominate individuals as beneficiaries. Beneficiaries do not have a direct legal claim to the assets until the trustees distribute them.
- Discretionary trusts allow trustees to decide how and when assets are distributed.
- Beneficiary nominations can be changed, with the latest written nomination taking precedence.
- Trustees have the final say in managing trust distributions.
Trustee Responsibilities
Trustees play a vital role in ensuring the trust operates as intended. Their main duties include:
- Managing and safeguarding trust assets.
- Distributing funds to beneficiaries as per trust instructions.
- Acting fairly and in the best interests of all beneficiaries.
- Keeping accurate records and complying with legal requirements.
- Seeking professional financial advice if needed.
Trustees cannot personally profit from their role unless they are professional trustees appointed for that purpose.
Next Steps
- Consider your goals: Reflect on what you want to achieve with a trust.
- Consult us at Abodo: Discuss your options and identify the best trust structure for your needs.
- Plan your next steps: Work with professionals to set up and manage your trust effectively.
For further information, contact your Abodo Mortgage and Protection Advisor today.
Please note: Trusts, Tax Planning, Estate Planning & Inheritance Tax planning are not regulated by the Financial Conduct Authority. Tax treatment varies according to individual circumstances and is subject to change.
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