Trusts for protection, control and long-term tax planning

Trusts for protection, control and long-term tax planningTrusts are an increasingly important way of protecting wealth and ensuring effective tax planning.

In this guest article, Kathryn Fielden at TWM Solicitors LLP looks at a couple of ways trusts can be used.

Protection and control – beneficiaries

Bruce and Sheila want to give £100,000 to their daughter Kylie, but they are worried as to how sensible she is with money.

If Bruce and Sheila give Kylie a gift of £100,000 outright, the money then belongs to Kylie who could spend it all on designer handbags one Saturday afternoon.

However, if Bruce and Sheila set up a lifetime Discretionary Trust with Kylie as a beneficiary, and appoint themselves Trustees, they can make controlled distributions to Kylie, rather than giving her the money in one lump sum.

Bruce and Sheila also want to give money to their son Jason, but Jason is only 16 and still at school.

If Jason were a beneficiary of a lifetime Discretionary Trust, Bruce and Sheila could transfer the money to the Trust now but make distributions in the future at a time when Jason needed the money.

Protection and control – third parties

If Kylie were to get married, but the marriage were to end in an acrimonious divorce, Kylie’s share of assets in the lifetime Discretionary Trust may be protected from being part of any divorce settlement.

If Jason in future set up his own business as a DJ, but then got into trouble financially, Jason’s share of the assets in the lifetime Discretionary Trust would be protected from his creditors.

Long term tax planning

Bruce runs his own business, Ramsay TV, which will qualify for Business Property Relief (BPR) on his death (so no inheritance tax is due on the value of the business when he dies).

If Bruce left Ramsay TV to a Discretionary Trust in his Will, then the value of Ramsay TV would not enter the Estate of his wife Sheila.

This would be particularly relevant if Ramsay TV were sold after Bruce’s death and so BPR were no longer available.

You can contact Kathryn at or follow the TWM Private Client team on Twitter @TWMPCDept.

Photo credit: Flickr/mochinbach


Keep reading

Join over 2,500 satisfied subscribers
Get the Informed Choice weekly update email

Straight to your inbox at the end of each week, our weekly update email shares the best of our content from the past seven days, so you don't miss a single thing.

This entry was posted in Financial Planning, News. Bookmark the permalink.

Comments are closed.