‘Ring-fencing’ assets to protect family wealth for future generations

You may want to consider putting some of your assets into a trust for a loved one. Trusts are a way of managing wealth, money, investments, land or property, for you, your family or anyone else you’d like to benefit.

They are used to protect family wealth for future generations, reducing the inter-generational flow of Inheritance Tax and ensuring bloodline protection for your estate from outside claims.

The way in which assets held within trusts are treated for Inheritance Tax purposes depends on whether the choice of beneficiaries is fixed or discretionary.

There are lots of different types of trust and some will allow you to ring-fence the money or property so that it sits outside of your estate when you die.

The most popular types of trust commonly used for Inheritance Tax planning can usually be written on either an ‘absolute’ or a ‘discretionary’ basis and the taxation treatment is very different for each.

A trust is a fiduciary arrangement that allows a third-party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Once the trust has been created, a person can use it to ‘ring-fence’ assets.

Trusts terms:

• Settlor – the person setting up the trust.
• Trustees – the people tasked with looking after the trust and paying out its assets.
• Beneficiaries – the people who benefit from the assets held in trust.

Trusts are a complicated area and can be expensive to set up. Some are subject to other tax regimes, so you should get authorised and regulated, specialist advice.