When it comes to protecting your assets, there are various legal structures available, each with its own benefits and considerations. One such structure is the interest in possession trust. At Blackstone Solicitors, we offer comprehensive legal services across England and Wales. This article aims to explain the advantages of using an interest in possession trust in a straightforward manner.
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What is an Interest in Possession Trust?
An interest in possession trust is a type of trust where the beneficiary, known as the life tenant, has the right to receive income from the trust assets or to use the trust property for a specified period, usually for their lifetime. The trust assets themselves are held by the trustees, who manage them according to the terms of the trust deed. Upon the death of the life tenant, the trust assets typically pass to the remaindermen, who are the ultimate beneficiaries.
Key Advantages of an Interest in Possession Trust
- Asset Protection
One of the primary advantages of an interest in possession trust is asset protection. By placing assets into a trust, you can protect them from potential creditors, divorce settlements, or other claims. The assets are legally owned by the trustees, not the beneficiaries, which means they are generally not considered part of the beneficiaries’ personal estate. This can be particularly beneficial in shielding assets from financial risks and ensuring they are preserved for future generations.
- Control Over Asset Distribution
An interest in possession trust allows you to maintain control over how and when your assets are distributed. You can specify the terms under which the life tenant receives income or benefits from the trust, and you can also determine the conditions under which the remaindermen will receive the trust assets. This level of control can be crucial in ensuring that your assets are managed and distributed according to your wishes.
- Tax Efficiency
Interest in possession trusts can offer tax advantages, particularly in terms of inheritance tax (IHT). While the life tenant is alive, the trust assets are considered part of their estate for IHT purposes. However, upon their death, the assets pass to the remaindermen without being subject to additional IHT, provided certain conditions are met. This can result in significant tax savings and ensure that more of your wealth is passed on to your beneficiaries.
- Flexibility
These trusts offer a high degree of flexibility. You can tailor the trust deed to meet your specific needs and circumstances. For example, you can include provisions that allow the trustees to advance capital to the life tenant or to vary the terms of the trust if circumstances change. This flexibility ensures that the trust can adapt to changing family dynamics or financial situations.
- Preservation of Family Wealth
An interest in possession trust can be an effective way to preserve family wealth. By placing assets into a trust, you can ensure that they are managed prudently and are not dissipated through poor financial decisions or external claims. This can be particularly important for families with significant assets or those looking to maintain wealth across multiple generations.
Setting Up an Interest in Possession Trust
Setting up an interest in possession trust involves several steps, and it is advisable to seek professional legal advice to ensure that the trust is structured correctly. Here are the key steps involved:
- Consultation with a Solicitor: The first step is to consult with a solicitor who specialises in trusts and estate planning. At Blackstone Solicitors, we can help you understand the legal implications and benefits of setting up an interest in possession trust.
- Drafting the Trust Deed: The trust deed is the legal document that sets out the terms of the trust, including the rights of the life tenant and the remaindermen, the role of the trustees, and any specific provisions you wish to include.
- Appointing Trustees: Trustees are responsible for managing the trust assets and ensuring that the terms of the trust deed are followed. It is important to choose trustees who are trustworthy and capable of managing the trust effectively.
- Transferring Assets into the Trust: Once the trust deed is in place, you will need to transfer the assets into the trust. This may involve transferring property, investments, or other assets to the trustees.
- Ongoing Management: The trustees will manage the trust assets according to the terms of the trust deed. This may involve investing the assets, distributing income to the life tenant, and ensuring that the trust complies with any legal and tax obligations.
Conclusion
An interest in possession trust can be a powerful tool for asset protection, offering numerous advantages such as control over asset distribution, tax efficiency, and flexibility. At Blackstone Solicitors, we have extensive experience in setting up and managing trusts, and we can provide expert advice to help you protect your assets and achieve your estate planning goals.
If you are considering setting up an interest in possession trust, we encourage you to contact us for a consultation. Our team of experienced solicitors can guide you through the process and ensure that your trust is structured to meet your specific needs.
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.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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