However our survey last autumn revealed that just 27 per cent of wealthy Brits over the age of 45 have sought advice and therefore many potential clients do not understand the value of financial advice.
People believe that the main reason for using a trust is to mitigate or eliminate inheritance tax. Simply put, assets that are placed into trusts are given to the beneficiaries and are no longer part of the settlor's estate, provided the settlor survived seven years.
While trusts can be used to mitigate inheritance tax they can also be used to:
• Protect the assets an individual has built up, during their lifetime, from being eroded paying for care home fees in later life, provided the assets were not placed in the trust to avoid a care fees charge which would run the risk of triggering the deprivation rules.
• Within the trust the settlor can express who the beneficiaries are and under some trusts place restrictions on when those beneficiaries can receive the trust assets. If the asset was not placed in trust and the settlor died intestate the distribution may be contrary to the deceased’s intention. By using suitable trust wordings the settlor can ensure, for example that a child does not receive the money until a certain age.
• Trusts are a great way to help protect settlors’ loved ones, ensuring they can be provided for in the future. When assets are placed in trust on death they do not form part of their estate, making sure they are readily available for the trustees to continue to provide for the settlor’s loved ones.
This can be particularly valuable where there are children from a previous marriage.
A trust is a useful estate planning tool. However like every such tool it has its own tax benefits and drawbacks, and as advisers you will play an important role in helping your clients work out if it is right for them.
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Canada Life offers a range of wealth management solutions, including retirement income planning, estate planning and investment solutions from a choice of jurisdictions, including the UK, Isle of Man and Republic of Ireland.
