Navigating trusts and estates can be a tricky process, but with the right support, they’re a great way to manage your assets. Below we will take you through some of the key areas if consideration for trusts and estates:
A person may choose to open a Trust for any number of reasons, not solely relating to make a Will:
- To reduce Inheritance Tax liability
- To hold assets for a child before they reach 18
- To provide for your spouse whilst maintaining the estate
- To ensure the family home cannot be sold in order to pay for residential care
People involved in a trust
Terms used when referring to people involved in trust of any kind are:
‘Settlor’ – the person who puts assets into the trust
‘Trustee’ – the person that manages the trust
‘Beneficiary’ – the person that benefits from the trust
Types of trust
There are many different types of trusts, all of which are taxed different, these include:
- Interest in possession trusts – a trust that requires a trustee to pass on all income to the beneficiary as it arises (minus any expenses)
- Discretionary trusts – this allows a trustee to make certain decisions on how the trust income (and sometime capital) can be used
- Accumulation trusts – here trustees are able to accumulate income within the trust and subsequently add this to its capital
- Bare trusts – these allow a trustee to hold the trust in their name, but provides the beneficiary with the right to all capital and income within the trust once they reach 18 years old
- Mixed trusts – a combination of more than one type of trust
- Settlor-interested trusts – this allows the settlor, their spouse or civil partner benefits from the trust
- Non-resident trusts – these trusts are for trustees are not a resident I the UK for tax purposes
Find out more about the different types of trust you can establish here.
Considerations for trusts and estates
If you are looking to set up a trust, we would highly recommend seeking the right support to ensure it is established accurately. An experienced accountant, such as Ellis & co., will look at your personal circumstances, your reasons for establishing a trust and provide detailed guidance on the administrative, accountancy and tax implications associated with setting up a trust. Furthermore, your chosen accountant will also support you with:
- Preparing your accounts for all trust types
- Distributing to beneficiaries
- Income and Capital Gains calculations
If you are looking to establish a trust and would like support from an experienced accountant, speak to the team at Ellis & Co. today on 01244 343 504.