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Trust funds and inheritance tax

Discover how you can lower inheritance tax by setting up a trust fund. Read more from Graysons’ wills and trusts solicitors in Sheffield & Chesterfield here.

A trust fund offers several benefits, including helping to lower inheritance tax, making them a useful legal vehicle to consider as part of an effective and tax-efficient wills and estate planning strategy. When you put assets in a trust, you no longer own those assets, meaning that those assets may not count towards your inheritance tax bill when you die. If you’re thinking of setting up a trust, then keep on reading. Graysons’ team of will and trusts attorneys in Sheffield and Chesterfield answer some of the most asked  questions about trust funds and inheritance tax.

What is a trust?

A trust, sometimes known as a trust fund, is a legal arrangement that enables you (the trustor) – to pass on assets, such as property, investments, and savings, to another person (the trustee) who manages the assets on behalf of a third person (the beneficiary). The trustor establishes the rules of the trust and states how the trustees should manage the trust, and how the beneficiary, or beneficiaries, will benefit from the trust, and when. It is important to note that the trustees have a legal duty to manage the trust for the benefit of the beneficiaries and in keeping with the rules of the trust. You can set up a trust at any point in your lifetime, and there are several different types of trusts, some of which give more flexibility than others. Which type of trust you choose to set up will depend on what you want to achieve from the trust. If you want to set up a trust, you should work with an experienced wills and trusts attorney, such as Graysons’ team of trust solicitors in Sheffield and Chesterfield.

How much inheritance tax will I have to pay?

How much inheritance tax you will have to pay depends on the value of your estate on your death, and how you have structured your assets, including if you have set up a trust. The standard inheritance tax rate is currently 40 percent, and the current tax-free threshold is £325,000. This means that you pay 40 percent tax on all assets over £325,000. There are several ways in which you can lower the amount of inheritance tax your estate pays, including  setting up a trust fund. Graysons’ team of wills and trusts attorneys can help ensure your family’s future is protected through effective and tax-efficient wills and estate planning. Contact our team of solicitors in Sheffield and Chesterfield today if you would like to find how you can minimise inheritance tax by setting up a trust.

Can a trust fund help lower inheritance tax?

Yes, a trust fund can help lower the amount of inheritance tax your estate pays. When you place assets in a trust, you no longer own those assets so long as certain conditions are met. Instead, those assets are owned by the trust. This means those assets will not count towards any inheritance tax that your estate pays. However, while you may not legally own the assets, you can still retain control over those assets depending on the type of trust you set up. It is important to note that different types of trusts will have different tax implications. If you want to find out how you can lower the amount of inheritance tax your estate pays, then you should work with an experienced wills and trusts attorney, such as Graysons’ team of trust solicitors in Chesterfield and Sheffield.

What are the different types of trusts?

There are several different types of trusts, including ‘Living Trusts’ (i.e. trusts that become effective when you create them) and “Non-Living Trusts” (trusts that only come into effect at the time of your death). The type of trust you set up will depend on your personal circumstances and what you want to achieve. Some of the most popular types of trusts include Bare Trusts, Interest in Possession Trusts, Discretionary Trusts, Vulnerable Person Trusts, Accumulation Trusts, Mixed Trusts, Testamentary Trusts, and Non-Resident Trusts. A skilled wills and trusts attorney, such as Graysons’ team of trusts solicitors in Sheffield and Chesterfield, will be able to advise you on which trust will help you achieve your desired outcome, including lowering inheritance tax.

What are the benefits of setting up a trust fund?

There are several benefits to  setting up a trust fund. A trust can help minimise the burden of inheritance tax on your estate. Trusts also enable you to transfer assets to family members, including young children, while maintaining control over  how those assets will be managed and used. Another valuable benefit of setting up a trust fund is the ability to protect family wealth by ring-fencing assets from lawsuits, bankruptcy cases, and financial setbacks. Finally, by setting up a Living Trust, you can  have complete peace of mind that your assets will go to loved ones and  your financial affairs are also kept private as any assets in a trust will not be part of the Probate Court’s public record.

Who can set up a trust fund?

Anyone can set up a trust fund. You can set up a Living Trust, or set up a trust in your last will and testament, known as a Testamentary Trust. Before setting up a trust, you will need to state what the trust’s assets are, who the beneficiaries and trustees are, and when you want the trust to become active. A wills and trusts attorney, such as Graysons’ team of Sheffield and Chesterfield solicitors, will be able to effectively set up a trust for you, ensuring it is legally binding and as tax-efficient as possible.

Why should I work with a wills and trusts attorney?

There are many pitfalls to setting up a trust, so it is crucial that you work with an experienced wills and trusts attorney. The trust documents must be watertight and legally binding to avoid costly disputes in the future. Additionally, the wording of the trust must be precise to ensure there is no ambiguity. Graysons’ team of solicitors in Sheffield and Chesterfield have decades of trust experience. Our experienced trust attorneys will advise you on the best type of trust to set up to meet your needs and then prepare the documents to ensure they are legally binding.

How can Graysons’ solicitors in Sheffield and Chesterfield help?

Graysons’ team of experienced wills and trusts attorneys can help you minimise the amount of inheritance tax your estate will have to pay through strategic and well thought out wills and estate planning. If you are interested in setting up a trust or want to find out how you can minimise the amount of inheritance tax your estate will pay, then contact our team of Chesterfield and Sheffield solicitors today.

 

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