Lifetime Trusts?
Discussion
Anyone got one?
Wife and I are in our 50’s with one child of 18 yrs. I retire in 2yrs when our house will be paid for and I’ll have a sizeable lump sum from my pension.
I’m keen to protect our estate for the benefit of our son and if done early enough a lifetime trust seems to tick this box, potentially protecting the estate from anyone otherwise wanting to dip their hand into it - divorce disputes, care fees etc.
I’d want the estate accessible for us both whilst alive if possible.
My employer partners with a financial company who offer some free financial services but I’m not a fan of going down the free route as they no doubt appoint themselves as trustees and they only provide remote consultations (phone, Teams etc).
Any advice or personal experiences welcomed.
Wife and I are in our 50’s with one child of 18 yrs. I retire in 2yrs when our house will be paid for and I’ll have a sizeable lump sum from my pension.
I’m keen to protect our estate for the benefit of our son and if done early enough a lifetime trust seems to tick this box, potentially protecting the estate from anyone otherwise wanting to dip their hand into it - divorce disputes, care fees etc.
I’d want the estate accessible for us both whilst alive if possible.
My employer partners with a financial company who offer some free financial services but I’m not a fan of going down the free route as they no doubt appoint themselves as trustees and they only provide remote consultations (phone, Teams etc).
Any advice or personal experiences welcomed.
Edited by The Gauge on Monday 5th May 09:48
PistonHead007 said:
Waste of space, sold only by unregulated law firms in it to make a fast buck off you. They carefully neglect to tell you about the loss of being able to use the Residence Nil Rate Band and that local authorities will probably see right through it as far as care costs go.
So what is the answer to protecting wealth?I've never seen any positive suggestions from those in the finance industry.
There must be some financial product available that can assist.
OIC said:
So what is the answer to protecting wealth?
I've never seen any positive suggestions from those in the finance industry.
There must be some financial product available that can assist.
Depends on the definition of wealth.I've never seen any positive suggestions from those in the finance industry.
There must be some financial product available that can assist.
If it's your main house and a few hundred grand in savings then there isn't much really.
TownIdiot has been brief, to the point and bang on target.
Your son is 18. Either trust him with a substantial immediate gift, or don't do anything. That gift can be made either now (preferred) or at any later date when you think he can be trusted with the ££.
Why?
1. Because lifetime gifts are CURRENTLY completely free from tax so long as you survive for 7 years. There's IMO a real risk that this government could, in future, introduce an immediate tax on lifetime gifts.
2. Because once the money comes out of trust and is used to buy a house then it becomes fully exposed to divorce, grandchildren etc. (Although this risk can be suppressed with a pre-nuptial agreement, at least until there are grandchildren.)
So what's the answer?
You could consider a modest start, with you and SWMBO giving him a total of £23,000 p.a.
Of those gifts the first £6,000 (2 x £3,000) is completely exempt from IHT. Tax on the remaining £17k will taper to zero if you survive for 7 years.
Guide the son to invest £20,000 in a Stocks & Shares ISA each year and leave it there to cumulate tax free.
Guide the son to invest £2,880 in a SIPP (pension) each year where it is grossed up to £3,600, cumulating tax free.
You can monitor his investments with him and if he gets uppity or decides to p155 the money away you simply turn off the tap - no more annual gifts of £23,000.
Your son is 18. Either trust him with a substantial immediate gift, or don't do anything. That gift can be made either now (preferred) or at any later date when you think he can be trusted with the ££.
Why?
1. Because lifetime gifts are CURRENTLY completely free from tax so long as you survive for 7 years. There's IMO a real risk that this government could, in future, introduce an immediate tax on lifetime gifts.
2. Because once the money comes out of trust and is used to buy a house then it becomes fully exposed to divorce, grandchildren etc. (Although this risk can be suppressed with a pre-nuptial agreement, at least until there are grandchildren.)
So what's the answer?
You could consider a modest start, with you and SWMBO giving him a total of £23,000 p.a.
Of those gifts the first £6,000 (2 x £3,000) is completely exempt from IHT. Tax on the remaining £17k will taper to zero if you survive for 7 years.
Guide the son to invest £20,000 in a Stocks & Shares ISA each year and leave it there to cumulate tax free.
Guide the son to invest £2,880 in a SIPP (pension) each year where it is grossed up to £3,600, cumulating tax free.
You can monitor his investments with him and if he gets uppity or decides to p155 the money away you simply turn off the tap - no more annual gifts of £23,000.
Is there any merit in transferring a percentage of the property into the sons name now? Or is that a lifetime trust?
Clearly having the property as tenants in common with wills that state that each share is for the benefit of the son (subject to a right to remain in the property pending the death of both parents) rather than the other spouse makes sense as a starter.
I am far from an expert but I know we have done the tenants in common bit with our house.
Clearly having the property as tenants in common with wills that state that each share is for the benefit of the son (subject to a right to remain in the property pending the death of both parents) rather than the other spouse makes sense as a starter.
I am far from an expert but I know we have done the tenants in common bit with our house.
Boringvolvodriver said:
Is there any merit in transferring a percentage of the property into the sons name now?
If you give something away but still retain the benefit of said item, you haven't actually given it away. It's known as a gift with reservation of benefit or GWR for short.In other words, you can't part out your house, still live in it and expect to save any IHT.
PistonHead007 said:
Boringvolvodriver said:
Is there any merit in transferring a percentage of the property into the sons name now?
If you give something away but still retain the benefit of said item, you haven't actually given it away. It's known as a gift with reservation of benefit or GWR for short.In other words, you can't part out your house, still live in it and expect to save any IHT.
The Gauge said:
So not much use then. As things stand I will be within the £1m IHT threshold so that's not a concern.
Is that just Lifetime Trusts? Surely trusts in general have a purpose and protect that investment to some degree?
If you're within the £1m IHT threshold what are you trying to protect your assets from? is it just the potential care home fees?Is that just Lifetime Trusts? Surely trusts in general have a purpose and protect that investment to some degree?
Panamax said:
TownIdiot has been brief, to the point and bang on target.
Your son is 18. Either trust him with a substantial immediate gift, or don't do anything. That gift can be made either now (preferred) or at any later date when you think he can be trusted with the ££.
Why?
1. Because lifetime gifts are CURRENTLY completely free from tax so long as you survive for 7 years. There's IMO a real risk that this government could, in future, introduce an immediate tax on lifetime gifts.
2. Because once the money comes out of trust and is used to buy a house then it becomes fully exposed to divorce, grandchildren etc. (Although this risk can be suppressed with a pre-nuptial agreement, at least until there are grandchildren.)
So what's the answer?
You could consider a modest start, with you and SWMBO giving him a total of £23,000 p.a.
Of those gifts the first £6,000 (2 x £3,000) is completely exempt from IHT. Tax on the remaining £17k will taper to zero if you survive for 7 years.
Guide the son to invest £20,000 in a Stocks & Shares ISA each year and leave it there to cumulate tax free.
Guide the son to invest £2,880 in a SIPP (pension) each year where it is grossed up to £3,600, cumulating tax free.
You can monitor his investments with him and if he gets uppity or decides to p155 the money away you simply turn off the tap - no more annual gifts of £23,000.
Can gift plenty more and put £50k in Premium Bonds, and also buy low coupon gilts and hold to maturity as no CGT on gains.Your son is 18. Either trust him with a substantial immediate gift, or don't do anything. That gift can be made either now (preferred) or at any later date when you think he can be trusted with the ££.
Why?
1. Because lifetime gifts are CURRENTLY completely free from tax so long as you survive for 7 years. There's IMO a real risk that this government could, in future, introduce an immediate tax on lifetime gifts.
2. Because once the money comes out of trust and is used to buy a house then it becomes fully exposed to divorce, grandchildren etc. (Although this risk can be suppressed with a pre-nuptial agreement, at least until there are grandchildren.)
So what's the answer?
You could consider a modest start, with you and SWMBO giving him a total of £23,000 p.a.
Of those gifts the first £6,000 (2 x £3,000) is completely exempt from IHT. Tax on the remaining £17k will taper to zero if you survive for 7 years.
Guide the son to invest £20,000 in a Stocks & Shares ISA each year and leave it there to cumulate tax free.
Guide the son to invest £2,880 in a SIPP (pension) each year where it is grossed up to £3,600, cumulating tax free.
You can monitor his investments with him and if he gets uppity or decides to p155 the money away you simply turn off the tap - no more annual gifts of £23,000.
The Gauge said:
So not much use then. As things stand I will be within the £1m IHT threshold so that's not a concern.
Is that just Lifetime Trusts? Surely trusts in general have a purpose and protect that investment to some degree?
Of course trusts have a purpose. It's just that in general you need to be protecting a lot more in asset value.Is that just Lifetime Trusts? Surely trusts in general have a purpose and protect that investment to some degree?
Or be genuinely giving it away so that the trust is run for the benefit of someone else.
Boringvolvodriver said:
PistonHead007 said:
Boringvolvodriver said:
Is there any merit in transferring a percentage of the property into the sons name now?
If you give something away but still retain the benefit of said item, you haven't actually given it away. It's known as a gift with reservation of benefit or GWR for short.In other words, you can't part out your house, still live in it and expect to save any IHT.
They converted the cow shed into a house for him (stunning conversion)
For the house to be deemed as a gift he can’t derive any benefit from the house or the gardens.
The cowshed is a different address with a segregated garden and no direct access to the main house or the land.
As he said to us, he only needs to service another 6 1/2 years…
Countdown said:
The Gauge said:
So not much use then. As things stand I will be within the £1m IHT threshold so that's not a concern.
Is that just Lifetime Trusts? Surely trusts in general have a purpose and protect that investment to some degree?
If you're within the £1m IHT threshold what are you trying to protect your assets from? is it just the potential care home fees?Is that just Lifetime Trusts? Surely trusts in general have a purpose and protect that investment to some degree?
Just my 2 pence leave it 5 years if there is no IHT to worry about. At 22 you will have a pretty good idea how sensible an adult your son is and what kind of path he is on.
Sometimes trying to lock it all up does more harm than good because it can restrict what everyone can do with it. Also can cause inter family friction between you, your son and his potential wife.
I say this as someone regularly in the middle of a tug of war with my parents and wife.
I was thinking of trusts in general as a way of trying to protect some money for the benefit of our son.
It's a problem isn't it, wanting a child to benefit from your estate whilst still having access yourself should you need it.
It's not just care home fees, but care itself. My terminally ill mother living in her home was paying £850/month for a carer to visit 3 x per day, for just 20mins each time, and the cost was going to increase as more care was needed, all because she has over £23k in assets. Had she spent all her money on holidays, cars, booze, expensive clothes etc then those carers would be free of charge.
It would be nice to know that my son would always benefit from any sizeable cash gifts we give him, but it then only takes a failed relationship and he could lose some or all of that money. But you can't plan against that and at some point you just have to give it to your children and hope things turn out well for them, as there's nowt you can do about it afterwards.
I would love to be able to give him a sizeable amount to help him when the time is right, and before old age arrives for us where it could be clawed back for IHT or care fees. Consider me selfish.
I do understand the argument against paying for the care of someone who has money, but society happily pays for those without, regardless of whether thats because they were never able to amass any money, or from having spent it all.
It's a problem isn't it, wanting a child to benefit from your estate whilst still having access yourself should you need it.
It's not just care home fees, but care itself. My terminally ill mother living in her home was paying £850/month for a carer to visit 3 x per day, for just 20mins each time, and the cost was going to increase as more care was needed, all because she has over £23k in assets. Had she spent all her money on holidays, cars, booze, expensive clothes etc then those carers would be free of charge.
It would be nice to know that my son would always benefit from any sizeable cash gifts we give him, but it then only takes a failed relationship and he could lose some or all of that money. But you can't plan against that and at some point you just have to give it to your children and hope things turn out well for them, as there's nowt you can do about it afterwards.
I would love to be able to give him a sizeable amount to help him when the time is right, and before old age arrives for us where it could be clawed back for IHT or care fees. Consider me selfish.
I do understand the argument against paying for the care of someone who has money, but society happily pays for those without, regardless of whether thats because they were never able to amass any money, or from having spent it all.
Society doesn't "happily" pay for those without - society doesn't have a choice (unless we are happy to let them starve and die on the streets)
I would say Society resents paying for people who CAN afford to pay for it themselves but want their own family to benefit at a cost to every other Taxpayer. It's the definition of selfishness.
I would say Society resents paying for people who CAN afford to pay for it themselves but want their own family to benefit at a cost to every other Taxpayer. It's the definition of selfishness.
TownIdiot said:
You are able to give him a gift.
Exactly this, lifetime gifts are a slam-dunk for IHT avoidance. And if you need some of the money back later he can always give it back to you - so long as he hasn't spent it.Where it all gets tricky is in the concepts of "keeping control of" or "continuing to have use of" stuff you've given away.
Trusts can have their uses but they're quite heavily taxed these days (often a flat 45% rate of Income Tax) and there are usually costs involved in setting them up properly and running them properly. Some trusts also suffer a reduced IHT charge every 10 years or whenever capital is distributed to beneficiaries. All trusts have to be registered with HMRC and will need proper accounts to be kept as well as filing a tax return.
It's often much easier just to give stuff away in a controlled fashion - see my earlier post - to maximise benefits of available tax reliefs. For instance, a trust can't benefit from either the ISA or the SIPP regimes with their very valuable tax free cumulation.
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