We look at the 3 key things to consider when setting up a Family Trust
1 Who to name as Beneficiaries
In a trust, the key persons are the Settlor, the Trustees and the Beneficiaries. The Trustee is the company or individual to whom you have handed over possession of your assets to; the beneficiary is the person(s) you have nominated to receive the benefit of those assets.
The Settlor is the individual whose assets are placed into the trust. An advantage to a trust is that you retain a very strong influence over exactly who the assets are accumulated for or who they are distributed to through the letter of wishes. For example, two children named as beneficiaries will be the sole recipients of the trust assets, regardless of who they marry, divorce or otherwise associate with.
Only those named as beneficiaries have any rights to the trust assets, so it is important to consider every person you want to benefit from your trust arrangements. Additional beneficiaries can be added at a later date or indeed removed if required.
2 What type of trust?
The flexibility of trusts is another key component to there being an effective estate management solution. There are different kinds of trust, each catering to different requirements, so your potential trustee, tax adviser or legal adviser can advise you on the most suitable kind of trust for your needs. A ‘bare’ or nominee trust is where the trustee is only a nominee, the trustees must simply follow the lawful instructions of the beneficiary in relation to the assets held in the trust. Conversely, a discretionary trust is guided by the trust instrument and the settlor’s letter of wishes, meaning that assets are administered and distributed in accordance with the settlor’s wishes. The trustees have discretion over the appointment of income or capital to the beneficiaries, there is no fixed entitlement with a discretionary trust. Should a fixed entitlement be required, this can be achieved through a life interest trust. The range of options provided by trusts, and any conditions/wishes of your own you wish to attach, can be generally discussed and incorporated.
3 Tax benefits
It’s no secret that tax laws around trusts are one of their appeals in some jurisdictions. Although recent legislation changes have tightened the tax benefits of trusts for residents of some jurisdictions, they can often still be a very tax-efficient option depending on an individual’s personal circumstances. Trusts may have the secondary effect of giving the opportunity to defer or mitigate tax liabilities or remove them altogether.
Where Inheritance Tax may be applicable on the transfer of assets or funds into the trust by UK residents, upon the death of the settlor or at ten-yearly anniversaries, for Jersey residents this is not an issue.
Each kind of trust is taxed differently, so it is definitely another issue to discuss with your potential trustee on the drawing up of your trust. Now, having carried out your research into what being the settlor of a trust will entail, the stage is set for drawing up the trust documentation.
How much will it cost?
Our fees are based on a time spent basis and at the outset of a new relationship relate to the client take-on, receipt and review of all client due diligence items and regulatory background checks on the settlor, named beneficiaries of the trust, protectors and any nominated advisors.
For new trusts time will also be incurred in agreeing the terms of the Trust and arranging for these to be captured in the form of a trust deed which we would want to have blessed by a UK tax advisor.
Once you have come to the decision that a trust would be the best option for you and your loved ones, a trust deed can be drawn up at any time you wish. At Alex Picot Trust, we have been looking after families’ assets for generations, and are renowned for our dedicated and personalised services. We work hard to ensure we can make arrangements that give you confidence and peace of mind that the people you love are taken care of.
Our overriding aim is to foster long term relationships with our clients which allows us to provide a highly personal and friendly service to them.
Steve Gully
LEARN MORE ABOUT HOW to build and manage a family trust effectively
Our printable PDF provides a thorough look at how to build and manage a family trust you can find it here.
Please contact our director, Hannah Roynon-Jones to arrange a complimentary initial consultation and bespoke proposal hannah.roynon-jones@alexpicottrust.com
