Think of a Family Trust as a legally created 'safe' into which you can place your home, savings, investments, life insurance and any other assets that you wish to keep secure during your lifetime. You have the key to the 'safe' and when you die this key is passed on to your spouse and family. So during your lifetime you have complete control of the key to the 'safe' and you have complete flexibility to add or remove assets from the 'safe' at any time.
However, no-one else can ever have access to your assets in the 'safe' as the Family Trust is a separate legal entity from you and it owns those assets. This legal protection is enshrined in English Trust law which has been in existence from the Middle Ages and is the foundation for Trusts worldwide. Trusts are used all the time to protect assets
After your death, the 'safe' and its contents pass to the beneficiaries that you have chosen to receive them. The beneficiaries can continue to use the Family Trust themselves or they can end it and receive the assets according to the terms of the Trust. The lifetime of a Trust is currently limited to 125 years.
What are the benefits of a Family Trust for us?
- Assets within the Family Trust are passed on immediately upon death and do not therefore incur any professional charges for handling probate. This alone will save us over £20,000 in professional fees.
- Children's Inheritance Tax Liability. Assets passed on to our children will not form part of their estate for IHT calculation if they are kept in the Trust. These assets are available to be used by the children but the Trust allows them to plan ahead to minimise any IHT liability that they, or even their children, might incur.
- A Family Trust allows us to ensure that after our deaths the family will benefit from the Trust and assets cannot be lost for instance by one of us remarrying. This is commonly known as sideways disinheritance.
- Assets correctly held within the Family Trust cannot form part of our estate for means tested benefits such as disability allowances or care fees, whether in our own home or in a residential care home should we ever need them. The Trust is a separate legal entity from the person setting up the Trust and therefore must be treated as such when calculating a
- One day we might have a child or other relative who has a disability who we want to benefit from our estate. This could be a mental, physical or psychological disability including addiction. Having a Trust in place means that we have appointed Trustees to manage their inheritance for their benefit.
- Having a Family Trust also ensures that should either of us lose mental capacity in the future we have appointed the people we trust to manage our affairs, without any involvement from the Court of Protection.
If you would like to know more about why a Family Trust could benefit you and your family please have a look at thewillassociates.co.uk and request a free guide.