Issue 24, Jan 2010. Protecting your family wealth

In an environment of rising taxes, knowing what you can do to protect your assets for your family’s future is essential. One way of doing this is to set up a trust, but what is a trust?

A trust arises where assets are transferred by one party (“the settlor”) to other individuals (“the trustees”) to hold for the benefit of others (“the beneficiaries”). The trustees owe a duty of care to the beneficiaries when managing the trust assets.

There are various types of trusts but the most useful is the Discretionary Trust. If assets are put into this type of trust and you survive seven years they will not form part of your estate on death. Assets can also be transferred into them generally without incurring a Capital Gains Tax charge.

Setting up a Trust

You may want to set up a trust for the following purposes:

• Succession planning - you may wish to pass on shares in a family company or other business interests to your children, but worry that they lack business experience or that the shares will be at risk, say, if they divorce in the future. By using a trust your children will benefit and you can still retain decision making power and overall control of those assets.
• Estate and tax planning – you may wish to start passing monies or property down to the younger generations, but consider that they are not yet ready to hold those assets in their own right. A trust will allow you to provide for your children or grandchildren and begin the process of passing assets out of your estate for Inheritance Tax purposes.
• You may wish to provide for lump sum pension death benefits to be paid into what is commonly called a “By-Pass Trust”. This can minimise the IHT charge whilst still allowing the spouse or other family members to benefit.
• If compensation is received as a result of an injury, by placing these monies into a special Personal Injury Trust means tested benefits will be preserved.

Even with the introduction of the transferable nil rate band it is still important to consider what the tax implication of our death may be especially for our children. We should also consider the best way of organising how our assets pass down the family so one or more of the following may apply to you:-

• To provide for a particular person during his or her lifetime, but with the estate (or specified asset) ultimately passing to someone else when that first person dies or remarries.
• To make provision for minor or disabled beneficiaries.
• To provide flexibility and allow decisions to be made regarding your estate depending on the circumstances in existence at the time of your death.
• To consider a Discretionary Trust to preserve assets for children on second marriage and also “ring fence” assets when the possibility of nursing home care fees should be considered.

If you would like some more information on Trusts, or if you have an existing trust that was set up a number of years ago and it no longer fulfils your original objectives, we can assist and offer advice.

We are here to help and offer advice. Any delay may give rise to unnecessary tax or loss of income, so talk to us to see if working together can help you reap the benefits.

For more information or advice contact:
Sarah Mochan on telephone no: 0121 746 3300 (Shirley office)
Derek Cook on telephone no: 0121 698 2200 (Birmingham office)

Date for your calendar

On Thursday 11th February, Sydney Mitchell and The Montpelier Group are holding an exclusive seminar at Fairlawns Hotel in Aldridge. They will be talking about how you can protect your family wealth and assist you in arranging your personal affairs to protect you and your family's assets from tax and the welfare state.

Derek Cook and Sue Capstick will be joined by Robert Kenyon and David Fleet from Montpelier giving specialist legal and financial advice will be brought together under one roof, outlining in simple terms what can and should be done to help you hold on to your money.

We will be holding presentations at 12noon and again at 6.30pm, for more information and or to book your place at the seminar call Georgina Smith on 0121 746 3300 or email g.smith@sydneymitchell.co.uk.