Passing wealth through the family, for most, is an important part of their estate preservation planning process. Pension funds are typically free of Inheritance Tax provided the scheme trustees/administrator has discretion over the payment of death benefits.
Avoid legal wrangles and confusion over who will benefit from your estate
A valid Will is an incredibly important part of estate preservation planning and will ensure that, should the worst happen, your assets, whether they be financial wealth or possessions, are distributed in an orderly fashion to the right beneficiaries.
Make sure your money and possessions go to the people and causes you care about
Thinking about death isn’t easy. Talking about it is even harder. The reality of our own mortality is a tough subject, but a discussion will ensure your assets are left to the right people.
‘Ring-fencing’ assets to protect family wealth for future generations
You may want to consider putting some of your assets into a trust for a loved one. Trusts are a way of managing wealth, money, investments, land or property, for you, your family or anyone else you’d like to benefit.
Understanding how the introduction may affect you and your trust
When you put assets in a trust, they are under the control of an appointed person or persons called ‘trustees’. The trustees then manage the trust according to your instructions, even after your death.
Bare Trusts are also known as ‘Absolute’ or ‘Fixed Interest Trusts’, and there can be subtle differences. The settlor – the person creating the trust – makes a gift into the trust which is held for the benefit of a specified beneficiary. If the trust is for more than one beneficiary, each person’s share of the trust fund must be specified.
With a Discretionary Trust, the settlor makes a gift into trust, and the trustees hold the trust fund for a wide class of potential beneficiaries. This is known as ‘settled’ or ‘relevant’ property. For lump sum investments, the initial gift is a chargeable lifetime transfer for Inheritance Tax purposes.
Default beneficiaries set up in the settlor’s lifetime
FlexibleTrusts are similar to a fully Discretionary Trust, except that alongside a wide class of potential beneficiaries, there must be at least one named default beneficiary. Flexible Trusts with default beneficiaries set up in the settlor’s lifetime from 22 March 2006 onwards are treated in exactly the same way as Discretionary Trusts for Inheritance Tax purposes.
These trusts are often used for family protection policies with critical illness or terminal illness benefits in addition to life cover. Split Trusts can be Bare Trusts, Discretionary Trusts or Flexible Trusts with default beneficiaries. When using this type of trust, the settlor/life assured carves out the right to receive any critical illness or terminal illness benefit from the outset, so there aren’t any gift with reservation issues.
Allowing someone to make decisions for you, or act on your behalf
A Lasting Power of Attorney (LPA) enables individuals to take control of decisions that affect them, even in the event that they can’t make those decisions for themselves. Without them, loved ones could be forced to endure a costly and lengthy process to obtain authority to act for an individual who has lost mental capacity.
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