Food for Thought: Pros and Cons of a Family Trust
Do you have a family trust? It’s more than likely with an estimated 1m+ trusts set up in the 1970s and 1980’s to avoid inheritance taxes. However, since these were abolished in in 1993, many people are considering if they still need to have a family trust.
For a start, a trust needs to be correctly administered so it can fulfil its purpose of protecting assets. A trust that is not administered correctly has a high risk runs the risk of being deemed a sham and exposing trust assets to claims against the settlor.
However, the costs of trust administration can be high, particularly where the trust holds income producing assets that require annual accounts and tax filing. These costs needs to be weighed against the benefits a trust can provide.
Trust can provide asset protection against a number of potential risks, which include:
• Claims on personal assets by business creditors
• Relationship property claims
• Possible re-introduction of estate duty
Trust GECA Chartered Accountants with your Family Trust
Trusts allow trust income to be shared amongst beneficiaries (generally family members) including those on lower marginal tax rates. They also provide a mechanism to safeguard assets for vulnerable children and allows for continuity of asset protection on death of the settlor.
These are all valid and valuable reasons to have a trust. However, the trust must be administered correctly including regular meetings by the trustees and appropriate records maintained such as Minutes of Trust meetings and Resolutions that document decisions made.
Changes to legislation have increased beneficiaries rights and it is important the Trustees understand their obligations under this new regime.
Read more about trusts in some of our previous blogs or visit our website for more:
- Trust Deed Review – Do I need one?
- Does your Professional Trustee know what to do if you are not around?
- Managing your family trust in the cloud
If you are unsure if you still need trust or have concerns about the administration of your trust, then we can help. Call your GECA Adviser now on 0800 758 766 for no obligation assessment of your situation.
