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Family Trusts and Asset Protection
If you want to dictate how your wealth is handled after your death, a family trust can help to ensure your assets are protected. Our highly-experienced team of solicitors can help you establish and manage a family trust to set out your wishes clearly and comprehensively.
The benefits of establishing a family trust mean that you will be able to:
Reduce your estate for Inheritance Tax (IHT) but retain control of the assets
- Provide for your family
- Provide relief from tax
- Protect assets being dissipated through divorce or bankruptcy
- Protect a beneficiary’s entitlement to means-tested benefits or care
What Types of Trusts Are There?
We can guide you through the variety of trust options available as part of your estate planning and wealth protection strategy to help determine the best solution for your situation.
We can advise you on trusts including:
- Family Trusts
- Personal Injury Trusts
- Charitable Trusts
How JMW Can Help
Our specialist lawyers have years of experience in creating family trusts and are recognised by our peers in the industry - we are frequently asked to give seminars on wills, trusts and estate planning and Inheritance Tax.
Several of our lawyers are members of the highly-respected Society of Trust and Estate Practitioners (STEP) and specialise in advising sports, media personalities and entrepreneurs on estate planning, as well as advising SME owners on inheritance tax and succession planning.
What is a Family Trust?
A family trust allows you to transfer assets to trustees who then have responsibility for looking after the assets until they can be passed on to other beneficiaries. This makes them particularly useful for keeping assets safe until a child or grandchild is old enough to inherit.
They are also commonly referred to as a life protection trust, a spouse protection trust and a wealth protection trust.
Setting up a family trust is one way in which you can put in place the necessary protections for your assets. However, the law relating to the protection of assets is complex and can involve several different facets of the legal system. Our team of lawyers can guide you through these complexities and advise you on any steps you can take to ensure your assets are protected, now and in the future.
What Types Of Family Trusts Are There?
The most common type of family trust is a discretionary trust. This type of trust gives the trustees discretion to distribute capital and income amongst a predetermined class of beneficiaries. The trustees are guided by your wishes as set out in a separate “Letter of Wishes”.
Other types of trust include:
- Fixed trust - beneficiaries are given a set amount of the wealth and assets
- Life interest or “interest in possession” trust - beneficiaries can use wealth and assets and are entitled to the income from the trust until they die and then it is passed on in accordance with further provisions (often falling into a discretionary trust at this point)
How Does a Trust Work?
Using a trust can assist in ensuring that your wealth does not come under threat from elements such as:
- Inheritance Tax
- Capital Gains Tax
- Care costs
- Business failure
- Forced inheritance, such as a child’s legal right or a cohabitant’s claim
- Family or matrimonial issues
How Many Family Members Can You Add To A Trust?
There is no limit on how many family members can benefit from a trust. You can also choose to add, or remove, beneficiaries of the trust after it has been established.
How Much Can You Protect In A Family Trust?
If you wish to place assets valued in excess of your available nil rate band (also known as the Inheritance Tax (IHT) threshold) within the trust, this would create an immediate charge to lifetime Inheritance Tax. The current threshold is £325,000. There are some exceptions to this, particularly where your assets qualify for business property relief (such as shares in a business. For further information, please visit our Business Protection page.
Life Insurance/Pension Trusts
If you want to protect your beneficiaries from Inheritance Tax (IHT), you may wish to consider placing your life insurance or pension lump sum into a trust.
At JMW, our experienced team of lawyers has the depth of knowledge to guide you through the process of setting up a life assurance or pension trust. In doing so, we can help you to ensure your beneficiaries receive the money you intend to leave them. The benefits of doing this are a reduction in IHT and flexibility and protection of assets.