We are strong advocates of the use of trusts in helping our clients restructure their finances in order to minimise loss of their estate in the event of death or ill health.

Life assurance and pensions can be placed in trust to ensure payment can be made free of Inheritance Tax and without the requirement for a grant of probate.

Single premium investments (most commonly investment bonds) can also be placed in trust. One purpose of this is to shield the value of the investment from Inheritance Tax. This can place some restrictions on access to capital and/or income, dependent on what type of trust is used.

However if Inheritance Tax is NOT an issue (and for many of our clients it is not), a trust can be used to shield the value of the investment from probate fees. And as this type of trust is NOT effective for Inheritance Tax, there are not the same restrictions associated with a trust taken out for Inheritance tax.

For example, a high street bank might charge 4% of the first £500,000 of your estate in estate administration fees. This equates to £20,000 plus vat, totalling £24,000. Were you to place say £325,000 of your assets in trust (and yes, this can include your home), this would reduce the value of your estate to £175,000. This would reduce the original fee from £24,000 to £8400, a saving of £15,600. Do bear in mind that if we reduced your estate (for probate purposes) to zero, most banks charge a minimum fee of around £1500 or more. So no, you wouldn’t get free estate administration from them.

Solicitors tend to charge a lower percentage fee but with hourly rates as well.

The other main benefit of this trust, apart from the huge savings in probate fees, is that the money can be paid out without waiting for the grant of probate.

The whole point of trusts is to ensure that "the right people get the right money at the right time". If you want more information on how trusts might benefit your situation, please get in touch.

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