TRUSTS - AT A GLANCE QUICK GUIDE
DISCRETIONARY TRUST
Allows a % of the residue, cash amount or a specific asset (e.g. insurance policy) to be set aside for the sole benefit of an individual who cannot manage their own finances. (Person may be mentally or physically incapacitated or alcoholic, bankrupt etc.) The executor would look after this providing the beneficiary with funds as required. The trust would normally last for a maximum of 80 years then any remaining amount would then be left to the residue or other beneficiary.
PROTECTIVE PROPERTY TRUST (estate under inheritance tax threshold)
Allows a property (or part ownership of a property) to be gifted to a specific named beneficiary. Client may also allow a person to have use of the property (or part of) but not the ownership for a specified time (e.g. 10 years, until death etc.) before it passes to the eventual beneficiary.
1) If the estate is worth less than the Inheritance Tax threshold this trust offers protection against a share of a property being sold for care home fees, or being given away by a surviving joint owner .
2) If the estate is worth in excess of the Inheritance Tax threshold then this trust would only be used if property was not to form part of inheritance tax planning.
NIL RATE BAND DISCRETIONARY TRUST (estate over inheritance tax threshold)
Used for mitigating against an inheritance liability for a married or civil partnership couple. Assets, including a share of a property, can be put into the Trust on first death up to the allowable Inheritance Tax threshold, thereby allowing a couple to make use of both threshold allowances saving, in most cases, several thousands of pounds of Tax. Beneficiaries are normally spouse, children and grandchildren though not exclusively.
BUSINESS TRUST CLAUSE
Allows for any specific distribution of a business asset or share of to a named beneficiary.
PET TRUST
An amount of money may be set aside for the sole benefit of a surviving pet for care, vet fees etc. The executor would look after this ensuring the trust was spent for the sole benefit of the named pet. On the death of the pet any amount left in the trust would be distributed as per the residue or to a named beneficiary.
