Lifetime Trusts

What is a Lifetime Trust?

A formal transfer of assets from your name into the names of trustees who will hold those assets for the benefit of others, the beneficiaries.

A lifetime trust is usually evidenced by a trust deed which will set out who the trustees and beneficiaries are, any rules or conditions that determine how the trust will be run and what assets make up the trust fund.

FAQs

WHY MAKE A TRUST?

Control. Making a trust will provide you with control over who benefits and to what extent from the trust fund (this could be cash, property, or any other assets) in the future. It is possible for you to be a trustee of the trust and have your say, but this is not usually recommended, or you may include certain terms in the trust deed.

Protection. You may decide that you wish to give assets away to family members to reduce the value of your estate for future tax purposes, but you may feel that those family members are not responsible enough and would like an alternative to giving the assets outright. The family members may benefit from the trust fund but without being able to squander the underlying assets.

Flexibility. If your trust allows, your trustees may be able to adapt to the changing circumstances of your beneficiaries. For example, if a trust contains flexible provisions, your trustees may be able to pay rental income from a trust asset to one beneficiary whilst they are studying or taking a career break, or in any other circumstances.

HOW DO I AVOID CARE HOME FEES?

There is no foolproof way of avoiding the assets being taken into account for means testing.

It is not possible to guarantee that the use of a Lifetime Trust to pass on assets that you no longer need in order to reduce the value of your estate should you have to go into residential care, will avoid these fees. There are a number of factors that will have to be taken into consideration and it may not necessarily be the answer for your circumstances.

Broadly speaking, if you place assets into a trust they no longer belong to you and therefore it is possible that such assets will not be taken into account for care fee purposes. We will be able to advise you about your own circumstances and whether there is the right course of action for you.

It should be remembered that only a small percentage of people need long term care so it may never become an issue.

HOW DO I REDUCE INHERITANCE TAX?

It may be possible through a trust to reduce the value of your estate for Inheritance Tax purposes by gifting assets into a trust. You should not retain any benefit of these assets and you and your spouse should not be beneficiaries of the trust. You will also need to survive for a period of seven years, for the trust to be effective for these purposes.

HOW MANY TRUSTEES SHOULD I APPOINT?

The maximum number is four, but two or three would be better. The more trustees there are, the more chance of them not agreeing on a decision!

WHO WILL BE THE BENEFICIARIES?

Anyone you choose! Your beneficiaries can be family members, friends, charities. Care must be taken on including yourself and your spouse as beneficiaries depending on the purpose and type of the trust.

WHAT ARE THE TAX IMPLICATIONS?

The tax implications will depend on the type of trust you make. We can advise you of the potential tax implications and you may need to discuss this further with an accountant or financial advisor.

CAN I CONTINUE TO USE ASSETS PUT INTO TRUST?

You can, although if you are creating a trust to minimise any Inheritance Tax liability or to avoid care fees then no, you should not continue to use these trust assets, for example HM Revenue & Customs will see this as a ‘gift with reservation of benefit’ and will include such assets in any Inheritance Tax calculation, i.e. treat the asset as still belonging to you.

A local authority may see a gift into a trust as a ‘deliberate deprivation of assets’ and therefore include the value of the assets when assessing your estate for contributions towards care fees.

HOW MUCH DOES IT COST?

Our fees are based on hourly rates and will be in the region of £750 - £2,000 plus VAT (£900 - £2,400 including VAT).

HOW DO I MAKE A LIFETIME TRUST?

Contact us in Carlisle on 01228 888999 or Cockermouth on 01900 820800 or email us on rcameron@bpkcumbria.co.uk or jwalker@bpkcumbria.co.uk to make an appointment or for further information.

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