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Caring for

generations

to come

Trusts and lasting powers of attorney

 

Lasting Powers Of Attorney

When you make a Lasting Power of Attorney you are called a ‘donor’ and the Attorney is simply called the ‘donee’. When you make an LPA you are effectively granting the Attorney the power to make decisions on your behalf.

As part of planning for your financial future and/or future care and welfare, you may wish to create an LPA. There are two types of LPA’s that you can make. One is concerned with your property and financial affairs whereas the other concerns decisions about your healthcare, known as a personal welfare LPA. The main difference between the two LPA’s is that the former LPA is able to be used by you as long as you possess capacity whereas the latter LPA can only be used when capacity is lost.

Trusts

There is a plethora of trusts that can be created by a person’s Will and to be effective upon the Settlor’s or Testator’s/ Testatrix’s death and there are similarly various trusts that can be created during the lifetime of the Settlor/Testator/Testatrix.

Trusts for the benefit of those with disabilities

A disabled trust can be set up for someone who has a mental or physical disability. There are two main trusts available in this regard. Non-interest in possession trusts dictate that there is no inherent right for the disabled person to receive the income from the income generated from the trust. However, where there is an interest in possession trust the disabled person becomes the ‘Life Tenant’ of the trust with an absolute right to the income generated from the trust.

Life settlement trusts

By setting up a trust of this type you can decide who the best people are to look after the funds on behalf of say your child or children. Also, you are able to set out the terms of the trust. You can include other beneficiaries if you wish and the Local Authority is less likely to be able to challenge your Will. Furthermore, and importantly, capital in the trust will NOT be taken into account for means tested benefits. Also, you are able to set out as to who will receive the trust assets after the death of your child/ren. You are also free to set up the most appropriate form of trust considering income, capital gains and Inheritance Tax concerns. Other family members are also able to add assets or funds to the trust such as grand-parents or uncles and aunts.

Fixed interest trusts

When you, as the Settlor/Testator/Testatrix, settle property upon trust you may wish to determine the precise extent to which your chosen beneficiaries are to enjoy the settled property in the future. An example would be, say ‘’£100,000 to be divided equally between my children Jordan and Fiona.’’ This is a fixed trust that identifies the trust fund (£100,000) and the beneficial entitlement of the children (in equal shares).

Discretionary trusts

Under a discretionary trust, your trustee(s) is given (by you as the Settlor) the discretion to select, from a specified class of beneficiaries, who will benefit under the trust and often when and to what extent. An example would be, say ‘’£100,000 to be divided between such of my children as my trustee(s) see fit’’. This is a discretionary trust that identifies the trust fund (£100,000) and provides the mechanism from which beneficial entitlement is to be allocated (that is, who gets what is left to the discretion of the trustee(s)).

Life interest trusts (interest in possession trust)

This is a trust that is established to provide a beneficiary (who is known as a life tenant) the right to receive the income (after expenses) from the trust. This right is usually given for their lifetime. On their death, the trust fund passes to the other named beneficiaries, known as residuary beneficiaries. The life tenant does not have any right to the capital, unless expressly given in the Trust Deed.

Trusts for bereaved minors

These trusts must be created by the Will or an intestacy for the deceased’s own child (the bereaved minor). The bereaved minor must, on or before attaining the age of 18, become entitled to the settled property, any income arising from it, and any income that has already arisen and been accumulated. While the bereaved minor is living and under the age of 18, any capital applied must be applied for the benefit of the bereaved minor. If any income arises from any of the settled property is applied for the benefit of a beneficiary, it must be applied for the benefit of the bereaved minor.

Trusts for bereaved young people

These trusts must be created by the Will for the deceased’s own child. The child must, at or before the age of 25, become entitled to the settled property; any income arising from it and any income that has already arisen and been accumulated. While the child is living and under the age of 25, any capital applied must be applied for his/her benefit. If any of the income arising from any of the settled property is applied for the benefit of a beneficiary, it is applied for the benefit of the bereaved child/ren.

Terminable life interests in a Will

Many Testator’s/ Testatrix’s wish to provide adequately for their surviving spouse or civil partner and yet wish to incorporate into their Wills flexibility whereby other members of the family may benefit should the surviving spouse or civil partner not require the provision when the Testator or Testatrix dies. Although a Will containing discretionary trusts or contingent trusts with overriding powers of advancement and appointment may be used to achieve the Testator’s wishes, the Testator/Testatrix may prefer a Will which gives his/her surviving spouse or civil partner a direct benefit in the form of a life interest (coupled with powers of advancement in his/her favour over the capital) with an overriding power of appointment; allowing the trustees to appoint the property away from the spouse or civil partner among a class of beneficiaries identified by the Will.

Property protection trusts in a Will

A Property Protection Trust (PPT) Will is a Will designed to help protect your property from an assessment to long-term care fees. Here the half share of the family home belonging to the first person to die passes and lodges itself into the PPT. This type of trust is also known as a life interest trust in favour of the survivor which means that they can benefit from the share of the house in the trust during his/her lifetime and on their death the trust fund passes to others; usually children of the family.

Asset protection trusts

Asset protection Trusts (APT) provide a ‘wrapper’ which can shelter your assets from Inheritance Tax and the arm of the Local Authority. APT’s are lifetime trusts, unlike Will Trusts which come into effect upon death. Lifetime trusts are established immediately. The rationale behind these types of trusts is to protect hard-earned houses and lifetime savings from being exhausted due to the payment of any care home fees. The idea is to preserve assets so that they can be inherited by a younger generation. Great care must be exercised in creating these types of trusts, as placing assets into such a trust can be viewed as ‘intentional deprivation’ and this can lead, under National Assistance and other State Benefit legislation, to the disentitlement of state benefits which would otherwise be available.

Deed of gift trust

A deed of gift can help you legally reduce your exposure to Inheritance Tax thereby ensuring you pass on as much of your estate as possible to family and friends and avoid the lengthy Probate process. In the United Kingdom, a Deed of Gift is a way to legally add a person (or people) to your property’s deeds. It may also be used for transferring money or shares.

Declaration of trust

A Declaration of Trust is a legally binding written agreement which outlines and records the financial arrangements between the joint owners of property. If you are buying a property with someone else, or contributing differing amounts to the deposit, fees or mortgage payments, it is crucial to plan ahead for when you and your spouse or civil partner want or need to sell the property or where there is a relationship breakdown. This can be done by a Declaration of Trust. It is important to create the declaration of trust at a time when the owners of the property and other persons who have contributed towards it, are in agreement.

Spousal bypass trust

A spousal bypass trust offers the asset protection benefits which trusts generally offer, providing shelter to family wealth in the event of bankruptcy, divorce or influence by 3rd Parties. Capital is safeguarded for children and other descendants. The trust structure also provides an element of control over how assets are used after your death, who benefits from them and when. This is beneficial if children are young or you have concerns on their use of a potential inheritance.

Flexible life interest trusts

A flexible life interest trust (FLIT) in your Will offers greater peace of mind if you have significant assets or investments as well as property, and wish to protect their value for future generations. The FLIT is often described as the ideal modern Will trust, as it allows for adequate provision for the surviving spouse/civil partner, whilst incorporating flexibility into the Will whereby other family members could benefit should the survivor not require the provision after the first death.

This is not an exhaustive list of the types of trusts that are available. We would be happy to discuss your requirements and your future financial wishes in order to ascertain what type of trust would fit your requirements, circumstances and long-term wishes. Creating a Trust is usually a fairly long-term matter therefore it is of uttermost importance to discuss your entire financial circumstances and give moral consideration to family members and issue or other lineal descendants.

Registered in England and Wales Registration Number 09852533

Member of the Information Commissioners office Data Protection 1998 ZA151513

Legal Practitioner

Insured by Hiscox

Corinthians Law UK LTD
Taunton Will Writers
41 Leslie Ave
Taunton
Somerset
TA2 6JW
07401 137 373
01823 251 210
heretohelp@corinthianslawuk.co.uk

© Corinthians Law UK Ltd.

Member number - SU68092612/15

Registered in England and Wales Registration Number 09852533

Member of the Information Commissioners office Data Protection 1998 ZA151513

Legal Practitioner

Insured by Hiscox

© Corinthians Law UK Ltd.

Member number - SU68092612/15

Corinthians Law UK LTD
Taunton Will Writers
41 Leslie Ave
Taunton
Somerset
TA2 6JW
07401 137 373
01823 251 210
heretohelp@corinthianslawuk.co.uk