Trusts

A trust is a legal arrangement where assets are managed by one or more people (the trustee/s) on behalf of another (the beneficiary).

Trusts can be set up for a number of reasons. They can be used to help mitigate an inheritance liability for estate planning purposes, or when someone becomes unable to handle their financial affairs. As such, trusts can be set up at any time and serve many purposes.

Rather than gifting money directly, you could choose to pass money to others by holding it in trust. Under this arrangement, the beneficiary (or beneficiaries, if there are more than one) will be specifically named, and the trustees (the people who administer the trust) will decide when to make payments to them.

All trusts are subject to the seven-year rule mentioned earlier. Some are subject to their own IHT rules, while others pay income and capital gains tax at higher rates. The main advantage with a trust is that you can have a say on who should benefit from the trust, as well as what your family chooses to spend the money on.

Like all tax rules, the rules around trusts and gifting can be complex, subject to individual circumstances and can changes at any time. That’s why you should always consult with a professional rather than making decisions on your own.

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