Trusts
Pooling your assets into a separate legal entity for your benefit and the benefit of your decedents. We’re here to help.
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What we do
At Open Financial Advice, in addition to advice on Investment and Pension growth, we also advise on future methods of ensuring your long-term financial legacy is maintained. Trusts are complex, but offer a vehicle to pool part of your funds, investments and assets within an entirely separate legal entity. All trusts differ in nature and our work gets to the source of which trust facility is best suited to each of our clients.
How we do it
In identifying any potential Inheritance Tax risk you may encounter in the future, we open the discussion on how this can be eliminated. Trusts, in their many forms, offer potential tax shielding, asset management and distribution between generations. Understanding your legacy expectations, in your specific case, guides us in developing the right trust to deliver on your needs.
Why work with us
Our trust work falls under our hourly rate bracket which we keep lower than the average IFA hourly rate within the London area, especially when utilising two different services, continuing to advise you at value. With our assistance, large sums can be protected and forward planning as far in advance as possible is the key for developing effective estate planning.
Trusts
As the standing rate of Inheritance Tax is 40%, trusts can form an important part of legacy and later life planning as well as providing a holding for investments and property that named or unnamed beneficiaries can benefit from outside of an estate. Current IHT allowances are up to £500,000 for individuals owning property, £325,000 for those without owning property and £1,000,000 for married couples with property, combining the two maximum IHT allowances together. The allowance takes into consideration property (including property abroad), modes of transport, investments, cash and household items over the value of £5000. We can assess your assets and liabilities to calculate a potential IHT liability.
Trusts can be used to avoid potential Inheritance Tax Liabilities, co-ordinating your wishes in accordance with your Will and additional further conditions you may wish to include to protect and distribute your legacy funds, transferred into trust for your beneficiaries. Funds within trust can be invested to enable further growth outside of the estate. Each trust carries a varying level of control for the trustees, beneficiaries and the depositor providing the funds within the trust.
Inheritance Tax – How Much Is It?
| Years between gift and death | Rate of tax on the gift |
| 1 to 3 years | 40% |
| 3 to 4 years | 32% |
| 4 to 5 years | 24% |
| 5 to 6 years | 16% |
| 6 to 7 years | 8% |
| 7 or more | 0% |
Inheritance Tax carries a seven-year period that the gifted fund can be tax liable, and this tapers down during this time as included above.
Transfers into trust can carry either a Potentially Exempt Transfer (40% to 0% over 7 years) or a Chargeable Lifetime Transfer (20%, with restrictions) depending on the type and facility of the trust in question, and we can assist you in understanding which works best for your specific requirements.
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We’re here to advise you in a holistic way to help you meet your goals now and in the future.
Bare Trust
This is the simplest trust and gives all assets to the beneficiary as long as they’re 18 years old or over (in England and Wales). Assets in a bare trust are held in the name of a trustee. However, the beneficiary has the right to the contents of the trust at any time if they’re 18 years old or over (in England and Wales). This means the assets set aside by the settlor will always go directly to the beneficiary.Bare trusts are often used to pass assets on to young people – the trustees look after them until the beneficiary is old enough.
Interest in possession trust
The beneficiary can get income from the trust straight away but cannot control the assets that provide the income. The beneficiary has to pay income tax on the money they receive.It’s common for a settlor to give their partner access to this kind of trust in their lifetime, with any assets passing to the settlor’s children after their partner dies.
Discretionary trust
The trustees have complete control over the assets and the income they generate, deciding how and when to give them to the beneficiaries.People may set up this kind of trust for their grandchildren, making the grandchildren’s parents trustees.