Trusts play a crucial role in real estate planning. Emma Morris, an associate attorney for Malton's Croby Wilkinson, wrote that Emma Morris, Malton's assistant attorney.
What is trust and why do you set it up?
A trust is a legal arrangement in which assets are held by one party (trust) for the benefit of another party (beneficiary). Trusts provide flexibility in managing and distributing assets, offering a variety of benefits, including:
• Protect future generations of assets.
•Reducing exposure to inheritance tax (IHT).
• Protection of assets for vulnerable or young beneficiaries.
• Promote charitable contributions. and
• Ensure that assets are used according to your wishes.
Types of trust
There are many different types of trust, each designed for a specific purpose. These include naked trusts, discretionary trusts, surviving trusts, and charity trusts.
The choice of trust depends on your goals, family circumstances, and tax considerations. Each option has its own legal and tax implications, so it is important to seek advice tailored to your situation to ensure the best results.
Set trust in your will and lifetime
You can establish trust in your life (“lifetime trust”) or through your will to enforce your death (“will trust”). Both options have distinct benefits and tax implications.
Understanding the structure and purpose of trust is key to achieving your goals. This includes adjusting the trust's objectives to the IHT position whether assets are intended to be distributed over a specific period or preserved for future beneficiaries, long-term plans and IHT positions. Also, when setting trust, you need to balance your current needs and future intentions, taking into account the stages of your life and financial situation.
Think carefully about potential risks, such as giving up control over the assets you need later or regretting transfers. Working with your attorney and an independent financial advisor (IFA) can address these considerations and ensure that your trust is in line with the overall real estate planning strategy.
Both types of trusts need to be carefully planned to navigate complex tax situations, along with legal and IFA advice, as well as tax advice, on tax outcomes.
While a lifelong trust may provide tax efficiency to those willing to give up immediate access to assets, Will Trust is ideal to ensure that your property is distributed in line with your wishes after your death.
What your lawyer needs to know
To help you set up trust, your attorney needs detailed information about your assets, goals and family circumstances. These steps can be introduced in the first discussion.
Additionally, most trusts require that you ensure compliance with your legal obligations, such as registering a trust with the Trust Registration Service (TRS). Failure to register a trust can result in penalties, so it is important to understand whether this applies to your situation and completes the required steps quickly.
A thorough discussion with your attorney can identify potential challenges and ensure that your trust is tailored to meet your unique situation.
How Crombie Wilkinson's Attorneys Help
To discuss more or setting up a trust, contact the legal counsel of the private client team at Malton or Pickering offices.
