Property Transfer by Using a Trust
Trusts are useful tools if transferring property is a complex process. Trusts are often used to manage long-term family situations, such as giving assets to children or grandchildren after they reach a specific age or complete their education. You may transfer all kinds of assets into a trust, including money, investments, buildings and land.
In brief, there are two types of trusts you can use to give away your property:
- Absolute trusts ensuring that a beneficiary will have the right to the trust funds from the age of 18.
- Discretionary trusts, which enable the beneficiaries to release trust funds at their discretion.
You can establish a trust either while you are alive, usually by a formal trust deed or on your death in your will (Will Trust).
Setting up a trust you have to:
- Specify the property to be given away.
- Appoint the trustees to look after your trust. In case of a lifetime trust you can nominate yourself as a trustee as well.
- Determine beneficiaries.
- Set out the rules that trustees have to follow when looking after the assets.
Inheritance Tax is payable when the transfers made into a trust exceed the threshold of £325,000 (Nil Rate Band) in the tax year of 2010-11. If the trustee pays Inheritance Tax, the tax rate is 20% on the amount above the current Nil Rate Band. If the trustor (settlor, donor) dies within seven years after making transfers into a trust, Inheritance Trust amounts to the full rate of 40% instead of 20%.
The major benefits of transferring property by using a trust are:
- Flexible Access to funds by beneficiaries such as spouse, children or grandchildren.
- Attractive option to make interest free loans to beneficiaries to reduce tax liabilities.
- Assets held in a trust are not assessed as capital of the surviving spouse if he or she requires long term care.
- Protection to some extent against bankruptcy.
If you need any assistance in transferring your assets by using a trust, please do not hesitate to contact Capital Business Links Ltd. You can use our telephone number 0208 567 99 44 or our e-mail address to learn more about our service or to make an appointment with one of our financial and tax specialists.