Protect your assets with Trusts
Trusts can both supplement and very rarely replace wills in managing your estate. In its simplest form, a trust is made when A (the settlor) gives some property to B (the beneficiary) but not immediately. Instead, A gives the property through set terms managed and implemented by C (the trustee).
You can have multiple people in any role. Depending on what you decide, the trust can take effect during your lifetime or upon your passing. There are called living trusts and will trusts respectively.
A trust will firmly protect your assets, give you a lot of say over how and when your property is given and set out ways of getting the property back if it is misappropriated that go beyond the limits of the common law.
Trusts allow you to give in a way that makes you feel sure your assets are safe. They get to choose the terms in which they are given and who gets to make sure these terms are carried out in the manner you want. Most importantly though, a trust means the property you are giving is widely protected and is a lot harder to take away from you or the person you are giving to.
1. Providing for children and caring for loved ones
You can set up a trust to pay specifically for your grandchildren’s education or the maintenance of a partner after death. This means that they, or a guardian, can’t spend the money on something else as it has to be used specifically for the set out purposes.
If you give property to someone through a trust, and that person then goes bankrupt, the creditors cannot come after what you have given them. They can go after everything else. Money, the car, the house. But not the assets you are giving them on trust!
If one of your children gets divorced, this could prove a sticky situation for if you want to pass the property on to them after death. A trust helps your ex-in-law stay away from the inheritance you want to give your child. Without a trust, they may walk away with up to half of your gift. But a trust will soundly prevent this from happening.
4. Inheritance Tax
Trusts, if carefully constructed, can help you reduce inheritance tax. As long as you survive for 7 years after having created the trust, it could help in reducing the value of your property for tax purposes.
They also provide a lot of flexibility. For example, you could choose to have a discretionary trust, where your trustee can choose whom to give the money to and how much to give each beneficiary. This is opposed to a fixed trust where you set exactly who gets what amount on a specific schedule.