Key contact
Peter Daniel
Partner - Head of Private Wealth
Private Wealth /
Family Trusts
Creating a lifetime trust, such as a family trust, can help ensure that your assets pass tax-efficiently to your loved ones, while protecting trust assets from assessment for residential care fees. We can help you plan ahead and preserve family wealth for the next generation.
The Team
Our lawyers have the expertise and experience to provide you with creative, personalised solutions in a clear and understandable way.
Our Publications
Discover a wealth of invaluable guidance in the form of guides and brochures written by our expert lawyers.
Our insights
Discover the latest insights and thought leadership from our team of legal experts.
View profileAbout
What is a family trust?
A family trust is a legal arrangement where an individual or group of individuals, known as trustees, are appointed to hold and manage assets on behalf of the trust’s beneficiaries. Trusts are typically established for the benefit of your immediate family, such as children or grandchildren, but they can also be set up more broadly to benefit friends, charities or other causes.
Why set up a family trust?
There are numerous reasons to set up a family trust. They include:
- ring-fencing assets for the benefit of future generations
- passing wealth to children or grandchildren but not until they are older
- protecting the vulnerable
How do family trusts work?
You have the choice of several family trust structures. The one you choose will depend on your individual situation and the goals you have for your estate.
The most common type of family trust is a discretionary trust. This type of trust gives trustees broad discretion about how the trust’s assets can be distributed among beneficiaries. A discretionary trust is an excellent option if you are not sure what your beneficiaries will need in the future as trustees have the flexibility to distribute funds when the need arises, such as when a beneficiary gets married or starts university. Discretionary trusts also allow the greatest flexibility to adapt to changing family circumstances.
Another option is a bare trust, where trustees manage the trust’s assets until a minor beneficiary is old enough to receive them.
You might also consider an interest in possession trust, which gives the beneficiary an income before the trust’s assets are distributed, or a mixed trust which combines elements of different types of trusts to meet your needs and situation.
Once you have established your goals, we can advise you on the most suitable type of trust. We can also provide advice on related issues such as inheritance tax planning.
How do I create a family trust?
You will need help to set up a family trust. The rules and regulations surrounding trusts and their taxation are complex and you need to ensure that everything is properly documented.
To create the trust, there will be a deed setting out the goals of the trust and who will benefit from it. You will need to list the assets that you plan to transfer into the trust and know which beneficiaries have the right to benefit from those assets and in what percentages in the future. You also need to appoint trustees who will be responsible for managing the trust. Trustees can be family members, friends or professionals such as solicitors.
What are the tax consequences of creating a family trust?
One of the main reasons for setting up a family trust is to reduce the inheritance tax liability payable on your estate when you die. The exact tax consequences will depend (amongst other things) on the type of trust that you choose to make, the amount of the loss in value to your estate and the value of the assets inside the trust.
Generally a transfer of assets to a family trust is chargeable to inheritance tax. The rate is 20% above the nil rate band available to you at the time (currently a maximum of £325,000) unless an exemption or relief applies. One of the situations where an exemption is available is when assets are placed in a bare trust as long as you survive for seven years after transferring the assets. Once the trust has been created then with the exception of a gift to a bare trust there may be exit charges when distributions are made and at each 10-year anniversary. This can be up to 6% of the trust’s value above the nil rate band .
We can advise on how to minimise taxes due on the trust’s assets when transferring them. To find out more about how we can help, please do not hesitate to contact us.
Peter DanielPartner - Head of Private Wealth
+44 20 7468 7351+44 7879 842645peter.daniel@collyerbristow.com
Caroline HollisChartered Legal Executive (FCILEx)
Explore the nuances of some of the most common aspects of UK/USA cross-border tax and estate planning.
Spotlight
Trusts for business owners
For clients who own trading businesses, trusts can be useful succession and tax planning vehicles to ensure the preservation of our clients’ wealth. For example, it may be possible to transfer shares in a business into a trust free from inheritance tax, while also optimising the capital gains tax position.
Spotlight
Trusts for future generations
Where clients wish to provide for their children and grandchildren (e.g. for the provision of school fees), it can be prudent to create a trust of up to the available inheritance tax allowance (known as the nil rate band). There will be no inheritance tax on creation and a new trust of this type can be created every seven years. Also, if clients have surplus income, outright gifts or gifts into trust out of this surplus income can be made which are completely exempt from inheritance tax.
Family Trusts Publications
Lifetime Giving Handbook
We have prepared a handbook to answer the most pressing and common lifetime giving questions and issues including; giving property to the next generation, gifts to vulnerable individuals, how best to fulfil an individual’s philanthropic ambitions, foreign gifts and the tax benefits associated with gifts of art.
Lifetime Giving | Trusts and School FeesA guide to tax efficient arrangements - A guide to tax efficient arrangements
Many families contend with paying school fees running into hundreds of thousands of pounds per child over the course of their education. This guide examines some tax efficient arrangements that other family members (typically grandparents) can use to contribute to these costs.
Lasting powers of attorney
A guide on making an LPA covering everything you need to know when considering giving another person certain authority to make decisions, in circumstances where you no longer have the mental capacity to do so on your own.
How are your cryptoassets taxed?
Guidance for individuals who hold cryptoassets, explaining what taxes they may need to pay, and what records they need to keep. Also included is information for businesses and companies about the tax treatment of cryptoasset transactions.
Decrypting a digital world
An overview of some of the key areas of interest in relation to cryptoassets, their legal treatment in the UK, and how they should be considered in tax and estate planning.
Why might a trust be of benefit?
A guide considering the many reasons and many circumstances where a trust might be of benefit.
Family Trusts insights
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Election 2024: Initial comments on potential tax changesElection 2024: Initial comments on potential tax changes
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Destination UK: Tax tips & relocation adviceDestination UK: Tax tips & relocation advice
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Can I make cash gifts under a power of attorney arrangement?Can I make cash gifts under a power of attorney arrangement?
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Tax Justice UK proposes wealth tax to raise £37 billionTax Justice UK proposes wealth tax to raise £37 billion
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Can I give my home to my children (and still live in it)?Can I give my home to my children (and still live in it)?
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US/UK givingUS/UK giving
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Need some more information? Make an enquiry below
Family Trusts key contacts
- peter.daniel@collyerbristow.comPeter
DanielPartner - Head of Private Wealth
Talk to Peter about UK trusts, tax & estate planning, International trusts, tax & estate planning, Private wealth, Probate and US/UK Tax & estate planning
Family Trusts
Family Trusts
Creating a lifetime trust, such as a family trust, can help ensure that your assets pass tax-efficiently to your loved ones, while protecting trust assets from assessment for residential care fees. We can help you plan ahead and preserve family wealth for the next generation.
Key contact
Peter Daniel
Partner - Head of Private Wealth
The Team
Our lawyers have the expertise and experience to provide you with creative, personalised solutions in a clear and understandable way.
Our Publications
Discover a wealth of invaluable guidance in the form of guides and brochures written by our expert lawyers.
Our insights
Discover the latest insights and thought leadership from our team of legal experts.
What is a family trust?
A family trust is a legal arrangement where an individual or group of individuals, known as trustees, are appointed to hold and manage assets on behalf of the trust’s beneficiaries. Trusts are typically established for the benefit of your immediate family, such as children or grandchildren, but they can also be set up more broadly to benefit friends, charities or other causes.
Why set up a family trust?
There are numerous reasons to set up a family trust. They include:
- ring-fencing assets for the benefit of future generations
- passing wealth to children or grandchildren but not until they are older
- protecting the vulnerable
How do family trusts work?
You have the choice of several family trust structures. The one you choose will depend on your individual situation and the goals you have for your estate.
The most common type of family trust is a discretionary trust. This type of trust gives trustees broad discretion about how the trust’s assets can be distributed among beneficiaries. A discretionary trust is an excellent option if you are not sure what your beneficiaries will need in the future as trustees have the flexibility to distribute funds when the need arises, such as when a beneficiary gets married or starts university. Discretionary trusts also allow the greatest flexibility to adapt to changing family circumstances.
Another option is a bare trust, where trustees manage the trust’s assets until a minor beneficiary is old enough to receive them.
You might also consider an interest in possession trust, which gives the beneficiary an income before the trust’s assets are distributed, or a mixed trust which combines elements of different types of trusts to meet your needs and situation.
Once you have established your goals, we can advise you on the most suitable type of trust. We can also provide advice on related issues such as inheritance tax planning.
How do I create a family trust?
You will need help to set up a family trust. The rules and regulations surrounding trusts and their taxation are complex and you need to ensure that everything is properly documented.
To create the trust, there will be a deed setting out the goals of the trust and who will benefit from it. You will need to list the assets that you plan to transfer into the trust and know which beneficiaries have the right to benefit from those assets and in what percentages in the future. You also need to appoint trustees who will be responsible for managing the trust. Trustees can be family members, friends or professionals such as solicitors.
What are the tax consequences of creating a family trust?
One of the main reasons for setting up a family trust is to reduce the inheritance tax liability payable on your estate when you die. The exact tax consequences will depend (amongst other things) on the type of trust that you choose to make, the amount of the loss in value to your estate and the value of the assets inside the trust.
Generally a transfer of assets to a family trust is chargeable to inheritance tax. The rate is 20% above the nil rate band available to you at the time (currently a maximum of £325,000) unless an exemption or relief applies. One of the situations where an exemption is available is when assets are placed in a bare trust as long as you survive for seven years after transferring the assets. Once the trust has been created then with the exception of a gift to a bare trust there may be exit charges when distributions are made and at each 10-year anniversary. This can be up to 6% of the trust’s value above the nil rate band .
We can advise on how to minimise taxes due on the trust’s assets when transferring them. To find out more about how we can help, please do not hesitate to contact us.
Peter DanielPartner - Head of Private Wealth
View Peter Daniel's profileAidan GrantSenior Associate
View Aidan Grant's profileCameron CreesAssociate
View Cameron Crees's profileCaroline HollisChartered Legal Executive (FCILEx)
View Caroline Hollis's profileCharlie FowlerPartner
View Charlie Fowler's profileDaniel SimonSenior Partner
View Daniel Simon's profileEmily MalvasoAssociate
View Emily Malvaso's profileIsobel RudgeAssociate
View Isobel Rudge's profileJames AustenPartner
View James Austen's profileJohn SanerPartner
View John Saner's profileNathania HallAssociate (FCILEx)
View Nathania Hall's profileRoger WoolfeConsultant
View Roger Woolfe's profileSuki LoftusTrust Manager
View Suki Loftus's profileTulin HamitPartner
View Tulin Hamit's profileExplore the nuances of some of the most common aspects of UK/USA cross-border tax and estate planning.
SPOTLIGHT
Trusts for business ownersopen
For clients who own trading businesses, trusts can be useful succession and tax planning vehicles to ensure the preservation of our clients’ wealth. For example, it may be possible to transfer shares in a business into a trust free from inheritance tax, while also optimising the capital gains tax position.
Trusts for future generationsopen
Where clients wish to provide for their children and grandchildren (e.g. for the provision of school fees), it can be prudent to create a trust of up to the available inheritance tax allowance (known as the nil rate band). There will be no inheritance tax on creation and a new trust of this type can be created every seven years. Also, if clients have surplus income, outright gifts or gifts into trust out of this surplus income can be made which are completely exempt from inheritance tax.
Family Trusts Publications
Family Trusts insights
Shorter Reads
Election 2024: Initial comments on potential tax changesElection 2024: Initial comments on potential tax changes
Read more
Longer Reads
Piggy Banks to Portfolios: can children hold shares in a company?Piggy Banks to Portfolios: can children hold shares in a company?
Read more
Shorter Reads
Stay or go? UK opposition’s tax hit on non-doms likely to encourage exodusStay or go? UK opposition’s tax hit on non-doms likely to encourage exodus
Read more
Shorter Reads
CB team comments on the Chancellor’s 2024 Spring BudgetCB team comments on the Chancellor’s 2024 Spring Budget
Read more
Longer Reads
Destination UK: Tax tips & relocation adviceDestination UK: Tax tips & relocation advice
Read more
Shorter Reads
Can I make cash gifts under a power of attorney arrangement?Can I make cash gifts under a power of attorney arrangement?
Read more
Longer Reads
Tax Justice UK proposes wealth tax to raise £37 billionTax Justice UK proposes wealth tax to raise £37 billion
Read more
Podcasts
IRAs and how they work (Part 2)IRAs and how they work (Part 2)
Listen now
Podcasts
IRAs and how they work (Part 1)IRAs and how they work (Part 1)
Listen now
Shorter Reads
Gifts to Disabled and Vulnerable PeopleGifts to Disabled and Vulnerable People
Read more
Shorter Reads
Can I give my home to my children (and still live in it)?Can I give my home to my children (and still live in it)?
Read more
Shorter Reads
US/UK givingUS/UK giving
Read more
Need some more information? Make an enquiry below.
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