Trusts

Trusts can be set up by Wills as a mechanism to deal with a person's estate after death or can be set up to operate during the creator's lifetime.

Reasons for the establishment of a trust include:
a) To provide for children while they are under age;
b) To preserve the family wealth;
c) To provide an income for a person while preserving the capital to pass to another person at a later date;
d) To transfer wealth in a tax efficient way;
e) To provide for people who are incapacitated;
f) To administer funds for charitable purposes.

While many people think that establishing trusts is something only of interest to the very wealthy, there are in fact many situations where families with quite modest assets might find them advantageous.

We have wide experience of creating and administering various types of trust. The most usual types of trust are:

Liferent Trusts
Liferent trusts allow a beneficiary the use of or income from the trust estate during his or her lifetime. For example, you might, on your death, want your spouse to be able to live in your house for the rest of his or her life but also want to ensure that at the end of the day it passes to your children. The way to deal with this is to create a liferent trust in your Will. There is no inheritance tax saving with this type of trust.

Discretionary Trusts
In a discretionary trust your trustees decide who should benefit from the assets allocated to the trust. Discretionary trusts can be built into a Will in a number of ways, for example:

a) Nil rate band Discretionary Trust
The Will contains a bequest in trust of the Inheritance Tax nil rate threshold usually for the benefit of the surviving spouse and children. This means that the fund will be available to the spouse should he or she need it but if not it can be passed to the children in a tax efficient way.
b) Two Year Discretionary Trust
This gives the trustees a period of two years within the date of death to decide how to apportion an estate among beneficiaries. This allows them to take into account the circumstances of the beneficiaries at the time and the tax situation then prevailing where these cannot be anticipated at the time the Will is made.

Bereaved Minor Trusts
These are created by a lifetime trust or by a Will for the provision of beneficiaries under the age of 18. Provided strict criteria are met these trusts attract certain tax advantages.

Charitable Trusts
Various types of trust may be set up for charitable purposes. Trusts that have charitable status have many tax advantages, but also many legal obligations under recent legislation. Peterkins have substantial experience in dealing with the administrative, fiscal and legal requirements incurred by such trusts.

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