Setting Up A Lifetime Trust: What You Need To Know

What is a Lifetime Trust?

The main difference between a lifetime trust and other types of trust is that you can transfer the ownership of some or all of your assets to a trust whilst you are still alive. 

You appoint/choose ‘trustees’ to help manage the trust assets both now and in the future. 

Creating a lifetime trust has the advantage of being able to satisfy most of the reasons for why you may wish to dispose of your property or assets before death.

Namely:

• To protect a vulnerable person’s assets and care both now and in the future. If you have a loved one who has disabilities or special needs, you may be concerned about what will happen to them when you are gone. A trust will clearly state this and secure assets now. 

• Avoiding problems following your death with family or relationship issues, e.g. remarriage or divorce of a beneficiary.

• Avoiding the need for probate on death; a property or asset can be transferred to beneficiaries more easily and without waiting months for probate to be granted. 

• Avoiding the need to sell the property to pay for residential care in the future, thus safeguarding family inheritance. 

These types of trusts can be very tax-efficient and allow you to meet the needs of your loved ones while you are still around and able to add your input, and continue after you are gone.

There are two main types of trust:

• A Lifetime Trust, which you set up during your lifetime, which includes;
  • Bare Trust
  • Interest in Possession Trust
  • Settlor-Interested Trust
  • Vulnerable Beneficiary Trust

• A Will Trust, which is created upon your death, and includes;
  • Discretionary Trust
  • Property Trust
  • Life Interest Trust
  • Charitable Trust

Getting Expert Advice

It is important to get professional advice on setting up a Lifetime Trust, as it will have implications for a trustees or beneficiary’s tax, and possible benefits. 

For example, it may be possible to reduce the amount of tax payable by a beneficiary under the Inheritance Tax threshold by transferring assets into the trust so they are not immediately available to meet their day-to-day living costs. 

A lifetime trust can also be used as part of an estate plan to provide someone with financial security. 

The trust is a very flexible entity, which provides more options to help accomplish your goals than other types of financial planning tools. 

Lifetime trusts are designed to last the lifetime of a person with disabilities or special needs, but they can also be used for other purposes such as asset protection and tax minimisation.

If you would like advice about how setting up a Lifetime Trust or a Will Trust could help you protect and support your loved ones, contact the Florins specialists today.