Interest in Possession Trusts (IPTs) are a common estate planning tool, but they may not always be the most suitable option. This article explores some key alternatives to IPTs in the UK, each with its own set of advantages and disadvantages.
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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
- Flexibility: Discretionary trusts offer significant flexibility. Trustees have wide discretion over how and when to distribute income and capital to beneficiaries. This allows for tailored distributions to meet changing needs and circumstances.
- Protection: They can provide greater protection for assets from creditors of the beneficiaries.
- Tax Planning: Discretionary trusts can offer certain tax advantages, such as the ability to accumulate income within the trust.
- Considerations:
– More complex tax rules.
– Less certainty for beneficiaries regarding their entitlement.
- Accumulation and Maintenance Trusts
- Flexibility: Trustees can accumulate income within the trust and use it to maintain or improve trust assets.
- Growth Potential: Allows for potential capital growth within the trust fund.
- Considerations:
– Limited flexibility for the income beneficiary.
– Potential for tax implications if income is accumulated for extended periods.
- Life Interest Trusts
- Similar to IPTs: These trusts grant the beneficiary a right to the income generated by the trust assets for their lifetime.
- Variations: Offer variations in how the capital is distributed upon the beneficiary’s death. For example, the trust deed may allow for a degree of flexibility in how the capital is divided among remainder beneficiaries.
- Considerations:
– Less flexible than discretionary trusts.
– May not be suitable for all circumstances.
- Bare Trusts
- Simplicity: A simple trust structure where the beneficiary has an immediate right to the trust assets.
- Suitable for Younger Beneficiaries: Often used for minor beneficiaries, with the trustee holding the assets until the beneficiary reaches adulthood.
- Considerations:
– May not be suitable for all estate planning objectives.
– Limited flexibility in terms of asset management and distribution.
- Pilot Trusts
- Modern Approach: A relatively new type of trust that offers a high degree of flexibility and control.
- Key Features: Allows for a wide range of investment options and provides trustees with broad powers to manage the trust assets.
- Considerations:
– Relatively new and complex structure.
– May require specialist legal and financial advice.
Factors to Consider When Choosing an Alternative
- The Settlor’s Objectives: What are the settlor’s primary goals for the trust? What are their intentions for the beneficiaries?
- The Beneficiaries’ Needs: What are the beneficiaries’ ages, financial needs, and personal circumstances?
- Tax Considerations: What are the potential tax implications of each trust type?
- Asset Protection: How important is it to protect the trust assets from creditors of the beneficiaries?
- Flexibility and Control: How much flexibility and control do the settlor and trustees desire?
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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