Trusts – not just the preserve of the rich and famous

Today, you don’t have to be incredibly rich for your family to benefit from the creation of a trust. They can offer long-term asset protection and have a variety of uses as part of financial planning strategies. A family trust can help protect your family’s assets for the benefit of future generations and may be used to protect the family home.

What is a trust?

A trust is a legal arrangement which allows assets, usually property or money, to be looked after by a trustee for the good of one or more beneficiaries. Those beneficiaries can be named individuals, such as your children, or can be children who are yet to be born.

Why set up a trust?

They can have a variety of uses such as:

  • Protecting the financial interests of a young beneficiary by retaining control of the assets until they reach the age of 18 (16 in Scotland)
  • Looking after the interests of somebody who can’t handle their own financial affairs through incapacity
  • Providing for a husband or wife, while keeping the assets intact for the benefit of children
  • Reducing Inheritance Tax (IHT) liability by taking assets out of an estate, thereby reducing the amount on which IHT might otherwise be payable
  • Protecting assets on marriage
  • Ensuring that the proceeds from a life insurance policy go to the beneficiary without waiting for probate, and don’t form part of the estate for IHT purposes.

Setting up a trust

The choice of trust will depend on who the beneficiaries are, what the assets are, and how and when you want them distributed. Taking advice on the type of trust that is most suitable for your circumstances is best.

The Financial Conduct Authority does not regulate some forms of taxation advice.

It is important to take professional advice before making any decision relating to your personal finances. Information within this newsletter is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Taxation depends on individual circumstances as well as tax law and HMRC practice which can change.

The information contained within this newsletter is for information only purposes and does not constitute financial advice. The purpose of this newsletter is to provide technical and general guidance and should not be interpreted as a personal recommendation or advice.

75% of over-50s aren’t saving for care

New research1 shows that although 60% of those surveyed feared losing their savings and homes to pay for care fees, less than a quarter of adults aged over 50 are making any provision for later-life care.

As people are living longer, it’s estimated that more than 143,000 older people, over a third of the 421,000 people currently receiving residential care, could face paying fees of £100,000 or more for their care.

Retirees in the dark about enhanced annuities

Buying an annuity is a way of providing a guaranteed income in retirement, but 70% of people questioned for a recent survey 2 were unaware that if they were to be suffering from poor health at the time of purchase, they might qualify for higher levels of income.

Enhanced annuities pay higher rates based on your lifestyle or medical history. Factors such as smoking, diabetes, high blood pressure and heart disease could boost your income as a result of reduced life expectancy. Those suffering from conditions such as asthma, high cholesterol and obesity may also qualify for higher levels of income, depending on how serious their condition is.

1Independent Age, April 2019.

2HL, April 2019