Setting up a Trust is a flexible way of giving away assets without passing them absolutely to Beneficiaries (eg become part of the Beneficiaries estate).
In order to reduce the occurrence of periodic and exit charges we would advise the use of Multiple Trusts settled (signed) on different days, therefore becoming non-related settlements commonly referred to as Pilot Trusts or Asset Protection Trusts.
Here are some of the main reasons to consider Multiple Trusts:
Compared to the Will, which is a public document that anyone can request a copy of once it has been admitted to probate, Trusts are semi-secret documents for the eyes of the Trustees alone. The Trust is a private document, the contents of which will not become public, therefore the information on whoever you have chosen to benefit from your Estate will remain private.
- Different Beneficiaries
In order to ensure privacy and separation for all parties connected with the Trust, you can name different Beneficiaries in different Trusts. The Beneficiaries of a Trust will not be involved in the use of funds for any other Trust if they are not parties to, Beneficiaries of, the settlement agreement.
- Autonomy & Management
You can assign different Trustees to different Trusts if you need to, meaning that different people control and have decisions making powers for different Trusts. Trustees of any one Trust must act unanimously. This can become an issue where there are disputes between the Trustees and they are longer on good terms. Trusts can no longer operate as intended if the Trustees cannot agree on a course of action and it may be that the funds cannot be put to use for the benefit of Beneficiaries as a result. Allowing different Trustees to act across a number of Trusts means that each Trust can be managed independently of others. This once again allows privacy and separation for the Trustees and Beneficiaries of each Trust.
Where a Beneficiary of a Trust gets divorced, any benefits they have received from a family trust may be taken into account in a settlement. If the Beneficiary can benefit from a number of Family Trusts but to date has only received a benefit from one Trust, for example, it is likely that only the Trust they have received a benefit from so far is at risk of being included in any settlement. Any Trust or Trusts that a Beneficiary has not received a benefit from to date may not be included in a settlement, as they have not yet received anything from the Trust. This can be a good way of protecting the assets, as the increased separation reduces the risk of attack.
In cases where the Trustees of a Trust are concerned with one Family or branch of the family as opposed to numerous members with different needs, the management of the Trust can be simpler, and therefore cheaper. A group of simple Trusts is much more manageable than a single Trust with many purposes, mixed assets, multiple Beneficiaries and more potential for arguments amongst them. You will also need to discuss with your Accountant possible liability to periodic and exit charges. However these are generally small compared with the potential 40% IHT payable if the assets are in the estate of your Beneficiaries
How many Trusts do I need?
There is no limit to the number of Trusts that you can create. Ideally, you’d have as many Trusts as you need for every significant asset or purpose.
For further information on how using Trusts may be of benefit to you and your Estate contact Newnham & Jordan Solicitors for a chat on 01202 877400
This article is intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.