Trusts are perfect for ensuring assets are passed over to exactly who you wish to receive your assets.

There is a common misconception that trusts are only used by the extremely wealthy to avoid tax. This means when clients consider estate planning, they may shy away from what could be a useful tool to achieve the outcome they desire.

Peace of Mind

Let us consider the position of a couple drawing up their Wills. They have children who are now adults, but they wrote their Wills when the children were young. It would not have been sensible to leave the money to a 19 year old and a 17 year old.  In the 17 year old’s case, they would not have been able to own anything other than cash investments at that point. A trust would therefore be a sensible option. As everyone becomes financially aware at different points in their lives, the trustees could control when they would receive the income and the capital.

The option becomes more important given the recent changes to undrawn pension funds at death, and the ability to nominate the pensions to successors.  Even for those not expecting to die any time soon, arrangements should be made to ensure that, in the event of death, the nomination can transfer the funds to a trust for the benefit of the successors (these can be whoever you like, but most people would choose their children).

Family Fallout

The second situation, which is becoming more common, is second marriage.  Let us say Mr Smith is widowed and he remarries. He has children from his first marriage, and his new wife, Hilda has children from her previous marriage. 

Mr Smith wants his family assets to pass to his children. His Will originally left all of his assets to Hilda, because he wanted her to live in their home and be comfortable for the rest of her life. Her Will then left the combined estate equally between all of the children from both sides of the family.  However, families can fall out over money, so what is to stop Hilda changing her Will after his death to leave the combined estate just to her children?

If Mr Smith creates a post-death interest trust upon his death for Hilda, maintaining the tax free spousal exemption, she can live in the house and receive income from the assets. However, she cannot change the fact that on her death the assets will pass under the trust deed as Mr Smith wants.

Complicated Matters

Trusts can be used to ensure the assets go where the settlor wants.  Continuing the example of the smiths, Hilda may remarry after his death.  In this case, her new spouse could have a say on the estate on her death, reducing what ends up with the children. A trust would prevent that.

There are many different types of trusts available and it is important expert advice is taken to consider which one is the most appropriate for your own circumstances and wishes.  If you would like to find out more, you can download our Trust Planning page here.  You can also read more about Why McCrea Financial Services are the people to work with to help you put your trusts in order.  

To arrange a no-obligation free initial consultation, please call 0141 572 1340 or email and we will arrange a convenient