What are Trusts?
Trusts have been in existence for the wealthy for hundreds of years and, with the increasing use of technology simplifying the preparation of such documents, it has also become the modern cornerstone to solicitor-drafted Wills for families.
We primarily recommend Trusts as giving all of the best options to an individual wishing to make gifts, whether in their Will or during their lifetime. Those options include lending the capital to the beneficiaries consecutively ‘in turn’ over the generations.
Trusts are not easily explained on a website or in literature. The structures are best explained in person if at all possible, hence why a personal service from a Solicitor is nearly always advisable.
When should Trusts be considered?
When making gifts of money or value, Trusts should be considered. We would say that an individual making a gift in excess of say £10,000 in value ought to consider making that gift via a Trust. This applies to gifts made in Wills on death as well as to gifts made during someone’s lifetime.
It is therefore easy to see why Trusts have become so popular, as they apply to so many circumstances of gift-making or for asset transfers.
Why are Trusts useful?
In simple terms, Trusts protect the money or asset gifted or transferred, for the beneficiaries.
Protection is desirable as there are a number of potential claimants against assets owned by individuals and families. Those potential claimants can be summarised as:
- “Second-marriage” issues: preventing step-families receiving assets to the detriment of direct children. For example, a widow or widower remarrying and assets passing to a second spouse and, on their death, to the second spouse’s own children.
- Inheritance Tax on your estate assets and those you have inherited from others, on death.
- Divorce: former spouses who can claim a share of your assets and those you have inherited from parents or other relatives.
- Creditors and those to whom you owe money – who claim against the assets you own or have received in gifts or inheritances from others.
- Crystalising wishes: to avoid changes in Wills at a later date that alter longstanding arrangements. Such as a widow(er) changing a Will just before death to benefit one child more than the other(s) when previously everything had been left equally.
- Care fees claims: alongside the above reasons for setting up Trusts, assets might also be protected from the claims of care fees.
A fundamental benefit of using Trusts is the ability to provide that gifts pass to consecutive beneficiaries ‘in turn’, ie making provision in a Will Trust for one particular beneficiary such as a spouse, then on the spouse’s death to make provision for those assets to pass down to a second set of beneficiaries such as children.
The other fundamental benefit is that Trusts protect the value of gifts for the beneficiaries in turn, ensuring that beneficiaries have full access to the assets but these assets are protected from outside third parties who cannot claim a share.
Trusts are excellent structures to protect assets until beneficiaries have reached a certain age or can protect assets for vulnerable beneficiaries or those with disabilities. They are the common form of structure to protect a disabled beneficiary’s entitlement to state benefits.
The standard Trust used is a Discretionary Trust. The Trust comprises a series of legal documents. The essence of the Trust is to create a ‘lifetime loan’ of assets to beneficiaries in turn, such as a spouse for life, then children for their lives and so on for the lifespan of the trust (125 years).
Costs for Trust preparation varies so much between organisations who claim to be specialists in this area. We have found through our years of experience that Trust preparation should be relatively inexpensive.
We may charge our time for advising clients on the use of a Trust structure but, as a guide, our costs to prepare Trusts that accompany Wills are £395+vat for the preparation of a Discretionary Trust or Life-Interest Trust covering up to £325,000 of value individually.
For estates that exceed £325,000 further trusts may be required at similar cost.
Administration of a Discretionary Trust: If we are asked to administer a Trust whether as appointed Trustee or as solicitor for a Trustee we generally charge by the time spent in the legal work or advice that is required. As a general rule there are no annual trust management charges.
How can I obtain information on Trusts or advice on their use?
If you intend to review your Will or make a gift in excess of £10,000 in value, we suggest you contact us to arrange a personal appointment. If a personal appointment is not convenient for you, we can arrange a discussion on the telephone and a set of notes or written advice to be provided.
Johanna Knott: an experienced solicitor and a member of the Society for Trust and Estate Practitioners and Solicitors for the Elderly. Contact Johanna at firstname.lastname@example.org. Johanna is based at our office in Chalfont St Giles and is a local resident.
Helen MacDiarmid: an legal executive with years of experience in handling a wide variety of Power of Attorney, Probate and Wills related matters. She is also a member of Solicitors for the Elderly. Contact Helen at email@example.com. Helen is based at our office in Chalfont St Giles.
Jennifer Beaujeux: an experienced legal executive with very sound knowledge in advising clients on all aspects of Power of Attorney, Probate and Wills related matters. Contact Jennifer at firstname.lastname@example.org. Jennifer is based at both our Chalfont St Giles office and our Stone office.
Robert Cartmell: an experienced specialist Solicitor having conducted Wills, Probate, Lasting Powers of Attorney and Court of Protection matters over an 18-year period for individuals and couples. He is a professional member of the Solicitors for the Elderly. He is currently appointed Deputy or Trustee on a number of matters. Contact Robert at email@example.com. Robert is based at both our Chalfont St Giles office and our Stone office.