How Interest In Possession Trusts Fit Into A Comprehensive Estate Plan

An interest in possession trust is a legal arrangement where property (often assets or land) is transferred to a trustee, who holds it for the benefit of another person, known as the beneficiary. Crucially, the beneficiary has an immediate right to the income and capital of the trust fund.

Please click here to find out more about our Private Client services

Free Initial Telephone Discussion

For a free initial discussion with a member of our New Enquiries Team, get in touch with us today. We are experienced in dealing with all the legal aspects of Trusts and once instructed, 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 are on the best possible footing from the start and also 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.

Why Consider an Interest in Possession Trust?

While often overlooked in estate planning, interest in possession trusts offer several advantages:

1. Tax Efficiency:
   • Inheritance Tax (IHT): By transferring assets into a trust, you can potentially reduce your estate’s value, lowering your IHT liability.
   • Capital Gains Tax (CGT): Depending on the specific circumstances, certain disposals of assets within a trust may be exempt or subject to lower rates of CGT.
   • Income Tax: If the beneficiary is a higher-rate taxpayer, income received from the trust may be taxed at a lower rate.
2. Asset Protection:
   • Creditor Protection: In certain circumstances, assets held in trust may be protected from creditors, particularly if the beneficiary is vulnerable or facing financial difficulties.
   • Divorce Protection: While not a foolproof solution, trust assets can offer some protection in divorce proceedings.
3. Flexibility:
   • Succession Planning: You can plan for the future distribution of the trust assets, ensuring they pass to your chosen beneficiaries.
   • Control: As the settlor, you can retain a degree of control over the trust assets, for example, by appointing specific trustees or reserving certain powers.

Key Considerations for Interest in Possession Trusts

When considering an interest in possession trust, several factors should be carefully evaluated:

1. Choice of Trustee:
   • Professional Trustee: A corporate trustee, such as a bank or trust company, offers professional management and administration.
   • Individual Trustee: A trusted individual, such as a family member or friend, can provide a more personal approach but requires careful consideration of their responsibilities and potential liabilities.
2. Trust Deed:
   • The trust deed is the legal document that governs the trust. It outlines the terms of the trust, including the identity of the beneficiaries, the powers of the trustees, and the rules for distributing the trust assets.
   • It’s crucial to seek legal advice to ensure the trust deed is drafted correctly to achieve your desired objectives.
3. Tax Implications:
   • As mentioned earlier, interest in possession trusts can offer tax advantages, but it’s essential to consider the specific tax implications for your circumstances.
   • Consulting with a tax advisor can help you understand the potential tax benefits and liabilities.
4. Potential Drawbacks:
   • While interest in possession trusts offer many benefits, they also have some drawbacks. For example, the beneficiary has immediate access to the trust assets, which may not be suitable for all individuals.
   • Additionally, there are ongoing administrative costs associated with running a trust.

Integrating Interest in Possession Trusts into Your Estate Plan

An interest in possession trust can be a valuable tool in a comprehensive estate plan. However, it’s important to consider its suitability within the broader context of your financial and family circumstances.

Here are some ways to integrate an interest in possession trust into your estate plan:

1. Asset Transfer: Transferring specific assets, such as property or investments, into the trust.
2. Lifetime Gift: Making a lifetime gift to the trust, reducing your overall estate value.
3. Will Trust: Creating a will trust, which takes effect upon your death and transfers assets into the trust.

Seeking Professional Advice

Given the complexities of estate planning and the potential legal and tax implications of interest in possession trusts, it’s crucial to seek advice from qualified professionals.

Blackstone Solicitors, with our expertise in estate planning and trust law, can help you navigate the intricacies of interest in possession trusts and develop a tailored solution to meet your specific needs.

By understanding the benefits, limitations, and key considerations of interest in possession trusts, you can make informed decisions about how to structure your estate plan and protect your assets for future generations.

How we can help

We have a proven track-record of advising upon all aspects of private client work. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.to incorporate, what kind of ownership

How to Contact Our Private Client Solicitors

It is important for you to be well informed about the issues and possible implications of dealing with trusts. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.

To speak to our Trust 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.

Authored by Ben Posted in Blog, News Tagged as

Comments are closed.