There are many different trusts that you can use for investment planning and it can be complex.
A trust is a way of choosing who will receive the benefit of certain investments without giving that person immediate control of them. A trust is set up by a trust deed and it is this document that sets out who is involved and the terms that apply.
If you were to set up a trust you would be known as the 'settlor'. This means that you would provide the investment to be put into trust. Certain people would be appointed to manage the investment whilst it is in the trust. These people are known as the 'trustees'. Trustees hold the investment within the trust for the eventual 'beneficiaries' who will receive the investment when a certain event happens i.e. you die.
Putting investments under trust can have implications on the settlor in terms of Inheritance Tax. We recommend that you visit inheritance adviser.com for a more in depth explanation and always seek professional advice as to which type of trust is suitable for your particular needs because there are so many available.
Generally speaking, if you take out an investment in your own name and you die, the proceeds of the investment will form part of your estate and will be included in any Inheritance Tax calculation. This can cause problems for your executors (the people who look after your estate when you die) as they will not be able to claim the proceeds until a Grant Of Probate is received.
By putting an investment in trust the proceeds will not be included in your estate (subject to certain rules which can be seen on inheritance adviser.com) so they can be paid out immediately to the executors with no charge to inheritance tax.
If you have been appointed as a trustee, whilst the settlor is still alive there will probably be very little for you to do. When the settlor dies you (and any other trustees) will need to make a claim for the policy proceeds. If the beneficiaries of the policy are under 18 the proceeds will normally have to be held within the trust until that date. It would be up to you and the rest of the trustees to ensure that the trust assets are managed properly and that appropriate records are kept until the proceeds can be paid out.
Trusts are complex and you should seek advice in your particular circumstances as to what is appropriate.
Contact us today for help with your trusts.