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Leaving A Legacy Through Trusts

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“We make a living by what we get, we make a life by what we give” – Winston Churchill.

As you would suspect, newspaper headlines seldom tell the whole story. As a consequence it is surprising how many believe that the inheritance tax threshold is now £1M. Regrettably this is not the case and it is not as simple as you may imagine. Where financial planning in retirement ends and Inheritance Tax mitigation starts has become more blurred with the relatively recent changes to pensions. The good news is that these changes also bring opportunities, which, when combined with different tax reliefs, allowances and the availability of Trusts, means that leaving a legacy is actually quite easy.

The use of a Trust ensures your wishes, even after you depart this earth, are still observed and only those who you wish to benefit from your legacy do so. There are different types of Trusts which are available to achieve different objectives; however, professional guidance is really needed to ensure the most appropriate arrangements are put in place and to understand the tax implications.

What Is A Trust For?

The purpose of a Trust, also sometimes referred to as a Settlement, is simply a means to ensure that defined assets are for the benefit of the right people at the right time. A Trust Deed sets out who you want to help, known as the beneficiaries, how you want to help them and when. This could be during your lifetime (“inter vivos”) or after. Trustees are appointed to oversee the Trust; indeed, you could be a Trustee yourself. The Trustees are the legal owners of the Trust’s assets and ensure your wishes, as defined within the Trust Deed, are adhered to.

When Trusts Are Helpful

Trusts are particularly useful when the beneficiaries are not really capable of receiving a legacy directly e.g. children. They can also provide a degree of discretion to Trustees to ensure the intentions of who created the Trust (the Settlor) are achieved and can take into account future possible circumstances e.g. an expanding family.

Trusts, when combined with life assurance, can ensure those without capital can still provide a legacy or as a means for beneficiaries of your estate to meet an inheritance tax liability.

Leaving a legacy can make a lasting impact and materially improve the circumstances and prospects of those you want to help. It requires forethought and planning but is eminently achievable through the use of Trusts and/or your Will. In the words of Max Lucado, “Outlive your life!”

Author: Paul Newton FPFS, CertPFS (DM & Securities), STEP Affiliate, is a Chartered Financial Planner for Castlegate Financial Management Limited, a firm of Independent Financial Advisers, authorised and regulated by the Financial Conduct Authority. 8 Castlegate Grantham Lincolnshire. 01476 591022. Tax and legal advice is not regulated by the FCA.