A family trust is a specific type of trust families can use to create a financial legacy for years to come.
Once active, they can continue for up to 80 years (under NI Law) providing a shelter in which important family assets such as cash, property or artwork can be placed so that future generations can benefit without ownership
There are a number of reasons trusts are set up including:
- to protect assets such as the family home from claims from creditors
- to set funds aside for the benefit of future generations (for example, to pay for their education)
- to ring fence your property in case you need residential care in the future
- to avoid inheritance tax
- to protect assets when entering into a marriage
- to protect assets when someone in your family has an addiction e.g. gambling, alcohol
A family trust ensures that your assets are managed according to your wishes on behalf of your beneficiaries.
The trust arrangement delivers two key benefits of saving next generation taxation as well as protecting children’s inheritances from lifetime impacts such as children divorcing.
All too often married couples have ineffective estate planning.
Families can spend years and years building up wealth yet if they miss this last part of planning they risk losing much of what has been accumulated.
Common issues faced by married clients include:
- Wills leaving a residual estate in equal shares to children
- Wills leaving an estate to a single child
- Lack of use of life interest gifting or planning for younger couples
- Clients with Wills gifting to elderly Siblings
- Clients leaving business assets to a beneficiary
- Clients using unprotected gifting methods in an attempt to reduce their own IHT or simply to assist their children.
In my next and final blog on this subject I will explore use of family trusts through a case study scenario.
Barra Gorman FPFS
Chartered Financial Planner