A Family Protection Trust can protect your family and your assets from a number of unforeseeable events including:
- The division of your assets following the divorce of your beneficiaries;
- Protection of your assets passing to a future spouse or partner before or after your death;
- Protection for your dependants that may be Disabled, Spendthrift habits or suffer from drug, alcohol or gambling addictions;
- An additional benefit of a trust may be protection from Inheritance Tax and Care home fees, these can be in the range of £20,000 to £50,000 per annum. Statistics indicate that 1 in 3 women and 1 in 4 men over 65 will go into care.
Making a trust will ensure that your specific wishes are set out during your lifetime.
A trust will require an annual review, the annual review will involve a discussion with the clients to review their circumstances, for example, have they inherited money, has the value of their property held in trust increased significantly, have they fallen out with a family member, also the discussion serves as a reminder to some clients that they still have the Trust and how it works.
Are there any assets which cause a problem if they are placed within the trust?
Property that isn’t your principle private residence may create an immediate Capital Gains Tax charge, this can be discussed with your specialist advisor who can provide further advice in relation to your options.
Is there any limit on the value of assets placed within a family protection trust?
There is no limit on the value of assets placed in a trust, however if you are placing assets valued in excess of the available Nil Rate Band (currently £325,000) within the Trust, this would create a charge to lifetime Inheritance Tax (20% on the value above nil rate band i.e above £325,000). A husband and wife can create two trusts, each capable of holding up to £325,000 each (£650,000 in total) of assets without being subject to any tax.
What is the family protection trust?
Technically it is a Lifetime Discretionary Trust, which can include your home, savings, stocks and shares, and/or any other assets that you wish to protect.
When you place your assets in a trust you still have full use of the assets and can add to them, sell them, replace them, borrow from them or pass them down to your family. However, if a third party or outside body tries to claim them, they cannot get access and cannot force you to give them the key.
After your death, the trust and its contents pass down to the beneficiaries that you have chosen to receive them and they can continue using the trust, enjoying the same protection that you had, or they can bring it to an end. When the Trust ends your Trustees will pass the assets to your beneficiaries without having to apply for a Grant of Probate, as the trustees would deal with all of this as part of the trust administration.
What about Ongoing Fees?
A trust will undertake an annual review, and therefore annual review fees are applicable, but they are kept as low as possible, normally these are in the region of £95-£200 per year. The yearly management review charge will cover:
- The costs of registering Trusts with HMRC where required
- The costs of preparing Trust accounts for HMRC where required
- Proactive management of the trust
- A full annual review discussion with the clients
Since YOU control the Trust, you can transfer all or some of the assets back into your name at any time. Transferring a property would entail a conveyance fee, much the same as any transfer of property.
What can be done if my / our home is worth more than the nil rate band?
The property title deeds may be amended to include part of the property, for example 80% of the house may go into the trust. Therefore, the majority of your home would be protected and would not be subject to tax charge.