PERSONAL ESTATE PLANNING SERVICES

Family Protection Trusts

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Family Protection Trusts guarantee that your hard-earned wealth reaches your children, grandchildren and other beneficiaries, rather than ending up in the wrong hands.

When assets are passed to beneficiaries “absolutely”, (i.e. they receive cash or property or other assets as a direct lump-sum payment), then they will be vulnerable to life’s uncertainties. Your wealth is then a part of your beneficiaries’ estate and would be at risk of claims from any remarriage, future divorce settlements, creditors and taxation. What if your child were to die before their spouse and your son in law or daughter in law were to remarry. Your hard-earned wealth could end up in an entirely different family.

With the appropriate use of family protection trusts, Michaels & Co., can ensure that your children and grandchildren are able to benefit from the inheritance you want them to receive, whilst at the same time, protecting them from being disinherited due to claims from third parties such as remarriage, care fees, divorce, creditors and for children with special needs.

“When assets pass to beneficiaries ‘absolutely’, so much is at risk due to life’s uncertainties. But with the appropriate use of trusts, your family wealth is protected from passing into the wrong hands.”

Find out more about our estate planning services, call 0800 240 4587 or complete the form below.

 FAQs – Family Protection Trusts/Bloodline Planning

What happens after my death, if my surviving spouse remarries?

Consider how this would affect your own children if your surviving spouse later changed his/her will in favour of the new spouse and any subsequent children? Your natural bloodline may be consequently disinherited.

It could happen that they remarry but die before their new spouse or that they divorce them.

Fortunately, with the strategic use of Family Trusts and the appointment of the correct trustees, this is entirely avoidable.

How can I gift assets safely during my lifetime?

Assets could potentially be gifted to beneficiaries before your death. This could prove extremely tax-efficient in terms of Inheritance Tax, as assets gifted away are fully outside of the donor’s estate 7 years after the gift is made. This is known as a Potentially Exempt Transfer (PET).

However, gifting assets absolutely would mean that these assets will again be at risk from divorce, remarriage and creditors, as well as adding value to the recipient’s estate for future Inheritance Tax.

It would be far wiser to consider gifting with the aid of Trusts. This means that although you make a gift to your children and grandchildren, the asset need not enter their own estate, thus protecting from any possible claims upon them in the future.

Can I have access to trust protected assets?

This very much depends on your motives for establishing the trust(s)

By gifting to a Trust, the settlor retains full control. However, even if they never received any benefit, but potentially could, the gift is classed as “With Reservation of Benefit” and the full value is deemed to be in the donor’s estate at death for Inheritance tax purposes, not just the initial gift.

A Gift Trust ensures that a spouse, children grandchildren and any other named beneficiaries can benefit at the Trustees’ discretion and is outside the settlor’s estate after 7 years. In other words, it’s a PET.

What if I want access to protected Trusts?

At Michaels & Co. we recommend a Discretionary Trust called a Probate Trust which, whilst potentially protecting assets from attack from care costs, allows the Settlor access to the assets held in the Trust. The Trust has a memorandum of wishes where the Settlor is also a beneficiary. The purpose for utilising this type of trust will be for bloodline planning and not Inheritance Tax Planning.

The main uses for a Probate Trust are to ensure assets pass to those intended without the need to wait for Probate. In addition, for a single or widowed client, a proportion of the main residence can be conveyed into our Protective Property Probate Trust which may protect the house from care. Individual advice would be required as to whether this is an appropriate course of action.

How many Trusts may I establish?

As many as is required for a robust estate planning strategy. There is a suite of Family Trusts available which we can tailor precisely to your individual circumstances. These include, although not limited to:

  • Family Protection Trusts
  • Flexible Family Trusts
  • Interest In Possession Trusts
  • Probate Trusts for Investments and Property
  • Gift Trusts
  • Business & Agricultural Trusts
  • Life Assurance Trusts
  • Pension – Death in Service Trusts
  • Personal Injury Trusts
  • Special Needs Trusts
  • Family Holdover Gift Trusts for CGT
  • Declaration of Trust
  • Deed of Variation Trusts
  • Historical Trust of Land/Property for CGT/IHT planning.

Each trust has its own individual Memorandum of Wishes which provides your precise instructions to the Trustees as to how you would wish the trust to be managed after you’ve gone. We provide detailed advice as to the optimum combination of trusts at our initial consultation.

How can I utilise Family Protection Trusts for Bloodline Planning?

It has been established that your children/grandchildren’s future inheritance can be at risk from a number of issues. Taxation is one, but inheritances can be impacted by a number of other more emotional issues such as care costs divorces and remarriage.

Family circumstances can also be a concern. It may be that there are some family members you would wish to benefit and some that you wouldn’t. A classic scenario would be an individual who has married into your family, but you wouldn’t want them to benefit from your estate. Family disputes do occur, and divorce and/or remarriage can greatly influence who inherits and by how much. Subsequently, if on inheriting monies, an individual then divorces that same inheritance is at risk.

Similarly, if an individual inherits assets but then is later subject to bankruptcy proceedings, or has creditors liabilities, then the whole inheritance could be at risk.

The correct Trusts can provide the protection and control of a multitude of assets from those risks noted above. This protection can extend from the family home to investment products and Family Businesses.

There are two potential scenarios when planning can be made with Trusts. One is during your lifetime and the other is in preparation for death. At Michaels & Co., we utilise a range of trusts in conjunction with the Will, which will ensure that your hard-earned assets are fully protected for your children and grandchildren. The type of planning is very much dependent on individual requirements and the value of the estate.

“Having had unhappy marriages, it was important to both of us, that the right people received what we had wished for after our death(s). Michael Doctors was so helpful, understanding and extremely patient with our lack of knowledge on such a delicate subject. Each step has been so easy with the help of the staff and it may sound strange, but it’s been a pleasure and stress free.”

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