When considering estate planning, it is important to consider whether the apparent speed at which an IHT exemption may apply would really be more important than the legal certainty provided by a trust structure.
Myth 4: Family members are best suited to be trustees
It has often been the case that family members have taken on the responsibility of being a trustee. While this may be appropriate in some scenarios, it is important to consider exactly what is involved and what is required of trustees today.
Trusts are subject to a notable degree of regulation, and the administrative burden can be significant.
Trustees are expected to be fully conversant with and understand the terms of the trust, regularly review the investments (with advice from suitably qualified and authorised investment professionals) and administer all tax requirements including the latest requirements to register the trust with HMRC.
Trustees are also expected to act fairly and impartially at all times. Anyone considering becoming a trustee needs to be sure they are willing and able to take on all the responsibilities involved.
Alternatively, families may prefer to use the services of professional trustees to manage a trust on their behalf, who may be better placed to ensure the Trust remains appropriately managed and in line with all current regulations.
Finally, let us consider a truth. Families considering setting up a trust need financial advice.
A trust needs to be set up carefully and correctly, with a full understanding of how it will work today and for future generations. Trusts can and certainly are used by many families to help mitigate IHT, but this is only one aspect of their application.
There are many types of trust, and different types of trust are subject to different tax rules which are beyond the scope of this article. An understanding of the principles of trust should be an essential part of every financial adviser’s knowledge, even if they are not a trust specialist.
It remains the case that trusts are sound, legal structures, and though rooted in centuries of history can be used effectively today to help families achieve a wide variety of financial planning goals, protecting and preserving wealth intergenerationally.
Mark Wintle is regional sales manager for Way Investment Services
