Trusts Flashcards
Describe the three parties to a trust
(3,5,5)
Settlor-enters assets into a legal structure that gives property over to other people whilst still retaining some control
Original owner
Can also be a trustee
Can be beneficiary but lose tax advantage
Trustees
Legal owners of assets
Control during term of trust
Follows rhe wishes of settlor
18+ and of sound mind
Governed by trust law
Beneficiaries
Intended recipients
No gusranteed right to benefit
Can take legal action against trustees
Min 18+
Some only receive income/not capital
Describe a bare trust(6)
Absolutely entitled
Usually at 18
Pet for IHT
trustees look after assets
Taxed on benefificary at marginal rate, use allowances
Taxed on parent if income >£100pm
Describe a discretionary trust (9)
Beneficiaries not fixed, could be settlo
CLT if over NRB
Trustees own assets
Settlor should be trustees so have say over beneficiary
Long list created of potential beneficiaries
Trustees pay tax
Distributed as trust income (<£1000 20%, if multiple trusts divide by amount, , >£1000 highest rate)
Outside of estate-quicker payment to trustees, dont have to wait for probate
Tax credit reaimable if overpaid
Describe an Interest in possession trust (4)
2 beneficiaries (life tenant-receives ongoing benefit during lifetime, remaindermen-benefits after tenant passes)
Taxed in trust at BR
Tax credit when distributed to beneficiaries
Trust expenses deducted beforepaid to beneficiaries in order if divs, savings, other income)
What is a trust for vulnerable beneficiaries (3)
For disabled persons or <under 18 and lost 1 parent
Same as bare=pet
Tax paid by trustees at beneficiaries tax rate and allowances
What is a will trust? (2)
Trust that starts on desth
Often holds assets until beneficiary is 18
What is an Intestacy trust
Set up by estate asministrtator for assets to beneficiaries when under 18
What does a pension scheme trust do?
Holds pension scheme benefits
What is a spousal bypass trust?(3)
Ls/income in trusts outside of estate on first death
Does not pass to spouse so avoids adding to estate value
Very tax efficient for IHT
What is a WOL policy in trust? (5£
Pays liability on death
On JLSD
Doesnt form part of estate
Premiums treated as gifts out of normal expenditure or within annual exemption
Can increase cover to counter inflatiom with reviewable premiums
What are spousal bypass trusts good for in relation to pensions? (5)
Trust receives dc fund from pension on death
Skips spouse
Trustees appoint income/capital to beneficiaries
Discretionary trust
Avoids estate inclusion
After kids receive spousal bypass assets what can be done to help to support spouse during lifetime
Loan can be made, repayable on death, reducing estate
