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Here at TreyBridge Accountants, we don’t just help business owners to gain confidence over their numbers, as we also work with individuals, couples and families who want to pay less tax and make their money go further. In this article we’re sharing some information about family trusts and how they can reduce your Inheritance Tax obligations. 

What is a family trust? 

A family trust is a legal entity that allows one or more individuals to benefit from an asset without being its legal owner. These assets could be in the form of cash, property or other investments, which can be put aside for your children in the future. You then appoint trusted people as the trustees (the managers of the trust) on behalf of its beneficiaries. 

Why take out a family trust? 

A family trust protects your assets even after you die or lose the capacity to manage your own financial affairs. They are often chosen because they protect assets from divorcing partners and business creditors, provide for children under the age of 18 in a tax-efficient way, and avoid Inheritance Tax for family members and their estates. 

Choosing a trustee 

The point of a family trust is that other people are appointed as trustees, who manage it on your behalf. These are usually family members or close friends that you can rely on and who are happy to be involved. A family trust will usually have between two and four trustees, or you can appoint a company such as a bank or firm of solicitors to manage the trust for you in exchange for a fee. 
 
The trustees will be given ownership over the assets and have the legal duty of responsibly managing the trust until it is passed on to the beneficiary. 

Trusts and Inheritance Tax 

Inheritance Tax is the tax on the estate of a person who has died. The threshold is usually £325,000, which means that anything above this is charged at 40% tax. Family trusts essentially remove assets from your ownership, which means that they’re no longer part of your estate. As such, the value of the assets within the trust normally won’t be counted when your Inheritance Tax bill is being calculated, which can save your loved ones significant figures. 
 
Whilst there’s always the option to hand over assets before you die, many people choose not to do this if their beneficiaries are still relatively young and may not yet have sufficient money management skills. 

You set the rules of your trust 

Another great thing about a family trust is that you can decide how it will be managed, such as stipulating that your children won’t gain access until they turn a certain age. This means that you have the reassurance that your assets will be properly managed and allocated when the times comes, which brings great peace of mind. 

Tax advice for family trusts 

We’re here to provide expert tax advice that can help you to dramatically reduce your Inheritance Tax liabilities and leave more of your assets to your loved ones. To find out more, call our London office on 0207 885 0605 or fill in the contact form below. 
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