Trusts attract myths, often repeated by someone with an interest in what you believe. A trust is a legal arrangement with written terms, trustees who must follow them, and beneficiaries who have rights. If someone tells you something about a trust that sounds convenient for them, it is worth checking.
"If you divorce, the trust money goes to the government"
It does not. A trust's property belongs to the trust and is dealt with as its terms say. A divorce does not hand it to the state. What a divorce can do is bring the trust into the financial settlement: a court can look at a trust when deciding what each party should receive, and in some cases can change it.
"The trust deed can't be produced"
A trust deed is a document, and the trustees hold it or can get a copy. If you are named as a beneficiary, you can ask the trustees for information about the trust. Good trustees take advice on what they are required to share and what they may keep confidential, such as a letter of wishes. That process is part of the protection a properly run trust gives: the trustees answer to the beneficiaries.
If you are not a beneficiary but the trust matters to you, for example in a divorce, a court can require the documents to be produced.
"A trust means no tax"
Trusts have their own tax rules. Putting assets into most trusts can be taxed at the time, many trusts pay a charge every ten years, and trusts pay income tax and capital gains tax at their own rates. A trust can reduce inheritance tax over time, but it is not a way to avoid tax altogether.
"My will mentions a trust, so I already have one"
A will that creates a trust only takes effect when you die. Until then, there is no trust. And the trusts in many wills are simple ones, such as holding money for children until they are 18, which may not do what people assume.
"Trusts are only for the very wealthy"
Many trusts protect modest sums: a child's inheritance, a share of the family home, a life policy. Their purpose is often protection and control, not tax.
A situation we see
During a separation, a wife was told by her husband that the family trust for their children would be lost to the government if she went ahead with the divorce, and that the trust papers were with his lawyer and could not be shown to her. She was close to signing away her claims on the strength of it.
Neither statement was true. Once she took her own advice, the trust documents were produced through the court process, and the trust was dealt with properly in the settlement.
This is an illustration. The people and figures are invented, but the situation is one we see.
Where to start
The Wealth R.I.S.C.™ Assessment looks at any trusts you have or benefit from, and what they actually do.
Questions people ask about this
Can I see a trust I am a beneficiary of?
You can ask the trustees for information about it. They should take advice on what they must share; some documents, such as a letter of wishes, may be kept confidential.
Does a trust disappear in a divorce?
No. A court can take a trust into account in the financial settlement, and in some cases change it, but the trust does not simply end or pass to the state.
Do trusts avoid tax?
No. Trusts have their own tax rules, and can be taxed when assets go in, every ten years, and on their income and gains.
Related
What a trust does, and when one is worth the cost.
Before you agree to anything.
Do they count in England and Wales?
Three steps, with room to stop
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1. Start with five questions and a short call
Answer five questions and choose a time for a 20-minute video call with Richard. Your answers are read beforehand, so the conversation starts with your situation.
The call goes over everything first: what your situation needs, whether the assessment is worth having for you, and the fee.
Where a straightforward piece of work would cover it, or nothing needs doing at present, you will be told so.
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2. The assessment: one hour, four steps
An hour on video, worked through the four R.I.S.C.™ steps, then a written report explaining your position, the options and the reasoning behind the recommendations.
Once it is booked and paid for, you complete a short questionnaire and an identity check, so the hour is spent on your position rather than on collecting facts.
The assessment looks at the relevant legal and tax questions together, so you can understand what is necessary, what may help and why.
We aim to send your written summary of the findings and recommendations within three working days of the assessment meeting.
The report is yours to keep. The assessment is paid work in its own right; its fee is not deducted from subsequent work. Fees for this and all other work are set out in the price guide.
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3. Decide what happens next
Take time to consider the recommendations.
You can act on the report yourself, ask Richard to carry out further work, or stop there.
If you proceed, the scope and fixed fee are agreed in writing before work begins.
You deal with Richard throughout
You should be able to ask why something is recommended and receive an explanation you understand.
You work directly with Richard Ansah TEP, from the first conversation through to the completed documents.
Richard is a full member of STEP and a member of the Society of Will Writers.
ONCE is an independent estate planning practice, not a firm of solicitors. Where your circumstances require another professional, Richard will explain why.
Ready to get this sorted?
Five questions, then a twenty minute call that goes over everything first: what your situation needs, what the assessment involves, the fee, and whether you need us at all.
Get in touch
Existing clients and general enquiries both welcome. Email reaches me fastest. The number takes calls, texts and WhatsApp.
London E20 1BD