Use of family trusts

Produced by a Tolley Owner-Managed Businesses expert
Owner-Managed Businesses
Guidance

Use of family trusts

Produced by a Tolley Owner-Managed Businesses expert
Owner-Managed Businesses
Guidance
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This guidance covers UK resident trusts only. For information on non-resident trusts, see the UK tax position of non-resident trusts guidance note.

Trusts continue to be popular in succession planning. The potential benefits of using trusts include:

  1. to give flexibility over future destination of property and to take account of future changes in the tax regime

  2. protection of property from unsuitable / undesired parties obtaining control (for example irresponsible children)

  3. protection of property for the benefit of certain specified beneficiaries (for example for the benefit of the deceased’s own children as opposed to step children)

  4. ensure suitable destination of life policies / lump sum payments under pension schemes, etc

  5. certain trusts are advantageous for tax purposes (see below)

  6. lifetime transfers into trusts are generally subject to IHT at the lifetime rate of 20% (after the nil rate band) which is an improvement on the death rate of 40% applicable for transfers on death (provided the settlor survives for seven years after the transfer)

  7. concealment of legal ownership by

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