Throughout our lives, we work hard to create savings, buy property, cars, invest in various financial instruments to create a good enough corpus to leave behind for our loved ones. But what happens to all these items when we die? When a person dies, everything they own solely while they were alive forms their estate.
Although, in the UK, more than half the population still does not leave behind a will, estate planning solicitors from SCL Wills & Probate, advise proper planning to ensure that your wishes are followed regarding the distribution of your assets and to minimise the amount of taxes that will become payable on your estate when you die. The process of estate planning helps manage a person’s assets while they are still alive, while after death, it helps minimize inheritance tax.
In the absence of proper estate planning, the beneficiaries could end up losing a significant amount of the taxable assets that they inherit to inheritance and income taxes. This is why it is crucial to learn all you can about how best to manage your assets such that your beneficiaries get the maximum value.
Creating a Trust
It is a popular misconception that only rich people set up trusts. However, it is true that the cost of setting up a trust can be high, depending on the complexities of the estate. You should also know that a trust is a legal document that permits you and your successor trustee, whom you authorise as an agent of your trust to safeguard, distribute and control your assets, including property, prior to and after your death, while ensuring that your wishes are carried out.
It allows you to allocate some of your assets to cover specific expenses, including college fees for children or expenses for their special needs. The trustee would be responsible for ensuring that that the designated amounts are used to cover specific expenses.
Who Benefits from a Trust?
Setting up a trust is ideal for those who have children with special needs, who can be made beneficiaries of the estate. Children or grandchildren with special needs or those who require specialist care might not be able to handle large sums of money. The same is true for those with children or grandchildren who suffers from substance addiction such as alcohols and/or drugs. In such cases, you should consider setting up a trust and appointing a successor trustee who will use the trust’s assets for the care, maintenance and well-being of your beneficiaries when you are no longer there to do so.
Through a trust, you can have the trustee distribute the income from the trust to your beneficiaries on a monthly basis to help them sustain their lifestyle. On certain occasions, such as covering education costs, medical emergencies, house purchase, etc., the trustee is allowed to distribute the principal to the beneficiaries.
Setting up a trust is a great way to fulfil your responsibilities, based on individual needs. It gives you enough freedom to be as creative and specific as you need to.
However, it is always advisable to seek professional help from estate planning and tax planning solicitors in the UK, who can help you in the creation of trusts, while ensuring that your estate plan meets all legal requirements