Estate planning is a crucial part of responsible financial planning. It involves making thoughtful decisions about the distribution of your assets after your passing. While a simple Will may seem sufficient, more sophisticated options exist to ensure your wishes are fulfilled and your beneficiaries are adequately provided for. Two such options are Discretionary Trusts and Living Trusts, each with distinct characteristics and benefits. This article will explore these two types of trusts, highlighting their key differences and helping you understand which option may be best suited for your individual circumstances.
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Free Initial Telephone Discussion
For a free initial discussion on how we can help you deal with the legal implications of creating a Trust, get in touch with us today. We are also experienced in dealing with all aspects of Wills and Probate and we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.
Discretionary Trusts
A Discretionary Trust is a legal entity that holds assets on behalf of beneficiaries. Unlike a Will, which typically dictates specific inheritances, a Discretionary Trust grants your chosen trustees broad powers to decide how and when to distribute the trust assets.
Key Features of Discretionary Trusts:
- Flexibility: Trustees have significant discretion in deciding how and when to distribute income and capital to beneficiaries. This flexibility allows for a tailored approach to estate distribution, considering the changing needs and circumstances of beneficiaries.
- Protection: Assets held within a Discretionary Trust are generally protected from the claims of your children’s creditors, providing a layer of protection for your beneficiaries.
- Tax Planning: Depending on the structure of the trust, there may be opportunities to mitigate inheritance tax liabilities.
- Succession Planning: Discretionary Trusts can be an effective tool for succession planning, particularly for family businesses.
Living Trusts
A Living Trust, also known as an Inter Vivos Trust, is a trust created during the lifetime of the settlor (the person creating the trust). It can be revocable or irrevocable.
- Revocable Living Trusts: These trusts can be amended or revoked by the settlor at any time during their lifetime. They offer flexibility and allow for changes in circumstances.
- Irrevocable Living Trusts: These trusts cannot be changed or revoked after they are created. They offer certain tax advantages and asset protection benefits.
Key Features of Living Trusts:
- Estate Administration: Living Trusts can simplify the estate administration process after death. As assets are already held in trust, probate may be avoided or significantly simplified.
- Asset Protection: Living Trusts can provide some asset protection benefits, such as shielding assets from creditors and potential lawsuits.
- Control: Living Trusts allow you to maintain control over your assets during your lifetime while providing for their distribution according to your wishes after your death.
- Special Needs Planning: Living Trusts can be particularly beneficial for individuals with special needs, providing a secure and sustainable source of income and support.
Discretionary Trusts vs. Living Trusts
- Flexibility: Discretionary Trusts generally offer greater flexibility in terms of asset distribution compared to many types of Living Trusts.
- Control: Living Trusts, particularly revocable trusts, offer more control to the settlor during their lifetime.
- Tax Implications: The tax implications of Discretionary Trusts and Living Trusts can vary significantly.
- Complexity: Discretionary Trusts can be more complex to establish and administer than some types of Living Trusts.
Choosing the Right Option
The most suitable option for you will depend on your individual circumstances, financial situation, and estate planning goals. Factors to consider include:
- Your age and health:
- Your family situation:
- The size and complexity of your estate:
- Your estate planning goals:
- Your desired level of control:
- Your tax situation:
Why Choose Blackstone Solicitors?
At Blackstone Solicitors, we understand that choosing the right trust is a critical decision with long-lasting implications. Our experienced team provides tailored advice to help you determine which type of trust best meets your needs. We offer comprehensive services, including:
- Advising on the benefits and drawbacks of discretionary and irrevocable trusts.
- Drafting trust deeds and other legal documents.
- Assisting with the transfer of assets into the trust.
- Providing ongoing support to trustees to ensure compliance and effective management.
We are committed to delivering professional and personalised service to clients across England and Wales.
Conclusion
Both discretionary trusts and irrevocable trusts are powerful estate planning tools, but each serves different purposes. Discretionary trusts offer flexibility and adaptability, making them ideal for families with evolving needs. In contrast, irrevocable trusts provide strong asset protection and tax advantages, particularly for those with substantial estates.
How we can help
We have a proven track-record of helping clients create Trusts. We are a multidisciplinary firm and have all the expertise inhouse to satisfy the most exacting requirements of our clients. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
How to Contact Our Wills and Probate Solicitors
It is important for you to be well informed about the issues and possible implications of creating a Trust. However, expert legal support is crucial in terms of ensuring your wishes are met as you would want them to be.
To speak to our Wills and Probate solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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