Many people use a Trust as a way to protect assets and maximise what can be passed on to others, such as children or grandchildren in a tax efficient manner.
People make a Trust for many different reasons, for instance to protect a compensation payment, fund school fees, protect assets from erosion via divorce, provide an income to another person during their lifetime, establish a charity or provide for a disabled person, the options are varied and to a point limitless.
Each Trust can have different terms, tax treatments and rules that dictate how administration of the trust is required. At Thompsons our solicitors have the knowledge and experience to offer you clear and practical legal advice when creating a Trust ensuring you make the most suitable choice for what you seek to achieve.
Creating a Trust allows you to choose individuals to help and support you in managing your finances.
Types of Trusts we can help you with:
- Personal Injury Trust
- Discretionary Lifetime Trusts
Personal Injury Trusts
A personal injury trust is a trust vehicle which holds funds paid as compensation to someone who has suffered a personal injury.
Following a personal injury, you may find it difficult to return to work and in some circumstances, may never be able to work again.
As a result, you may be entitled to claim certain benefits and local authority support to make your daily life easier. Many benefits are means tested, which means that any damages that you receive beyond the benefit threshold can be taken into account when assessing your eligibility to start or to continue to claim means tested benefits.
A Personal Injury Trust is given special status within benefits legislation and ensures that entitlement to means tested benefits and local authority support are preserved. Personal Injury Trusts allow funds held within the trust to be ‘disregarded’. This means that eligibility to benefits such as income support, housing benefit and so forth will not be affected by the compensation.
If you have received compensation and do not set up a Personal Injury Trust, it is likely that your entitlement to means tested benefits will be affected, if not stopped.
Aside from protection of means tested benefits, a Personal Injury Trust can be of use in other circumstances. For example:
- If you do not have much experience dealing with large sums of money or are overwhelmed at the prospect;
- If you are worried about third parties, such as family or friends, influencing your spending;
- If you have a disability and struggle to manage your funds
When funds are held within a trust, they will also be disregarded for any assessment of residential care and may offer some protection for financial assessment of care at home. Please note however, no guarantee can be made as to whether placing compensation funds into a trust will ensure you receive free care. The local authority will always consider your case on its own merits.
Discretionary Lifetime Trusts
During these uncertain times, more and more clients are seeking advice on the best way to protect their assets for the benefit of their families. This is where Trust planning should be considered, and a Discretionary Trust can help.
This type of Trust is normally set up by individuals or couples, with a view to protecting assets from various risks including executry costs, sideways disinheritance, family claims and residential care fees, or a range of other risks including bankruptcy and divorce.
Discretionary trusts can be very useful in a number of circumstances. They can be tailored to suit the needs of you and your family.
A Discretionary Lifetime Trust can hold any type of asset, but commonly will hold residential property, cash, and/or investments.
The trustees you appoint will have control and discretion over when to release a beneficiary's inheritance, it enables you to potentially leave assets to people who:
Cannot manage their own affairs, perhaps because they are not old enough or they do not have the legal mental capacity
- Are in receipt of means tested benefits and would lose these benefits if they inherited a lump sum of money outright
- Are at risk of wasting their inheritance, perhaps because they have an addiction or mental illness
- Are in a relationship with someone that you feel may influence or exercise control over any inheritance if they received it outright
- Are financially irresponsible
In some situations, you can also request that a beneficiary's share is only released in certain circumstances.
A discretionary trust gives trustees the power to decide how much beneficiaries get from a trust and when they get it. All capital and income is distributed completely at their discretion. This means there’s more flexibility and assets can be protected if circumstances change for any reason.
Talk to Thompsons
For advice on what Trust would be best suited to your circumstances contact us on 0800 0891 331. Our team have a particular interest in Trusts, in addition to advising trustees we act as trustees for a number of Trusts.
Our team will talk you through the different types of Trusts available ensuring you fully understand all your options and will provide the advice and support required to set up a Trust.