Tax Issues For Trust Beneficiaries

The use of trusts in tax planning can be an extremely effective tool when advising on family succession or asset protection matters. The concept of a trust is very straight forward, an individual (the settlor) wishes to make a gift of an asset to another person (the beneficiary) but does not want to make the gift directly, instead they choose to give it to somebody they trust (the trustee) with instructions on how the asset should be managed. This effectively splits the beneficial and legal ownership of the asset.

Beneficiaries

The beneficiaries have the beneficial ownership of the asset and by this we mean they receive all the income and benefit from the asset. The trustees have the legal ownership meaning they control the asset and how the benefit is passed down to the beneficiary. Based on my experience of working with clients in the Doncaster area, the most common types of assets settled into a trust are usually land and property and shares, both private limited company and share investment portfolios.

Again, based on past experience, the usual types of scenarios when trusts are used by clients include:

• Parents wishing to retain some form of control over assets handed down to children and grandchildren
• Fears over divorce or when dealing with protecting assets in a second marriage
• Concerns that the asset might be quickly wasted away if an outright gift were made
• Flexibility over who can benefit, including future generations

However, trusts are subject to taxation for both the trustee and the beneficiary, so it is important that taxation of trusts are discussed prior to placing family assets into a trust. Both the beneficiary and the trustee need to be aware of the tax implications of a trust.

Tax Advice for Trustees in East Yorkshire

Haines Watts, accountants in Doncaster, have lots of experience of providing tax advice for trustees and beneficiaries of trusts, in what can be an extremely complicated area of UK tax. Our partners also have significant experience of acting as professional trustees, quite often alongside a legal professional to help families manage their assets in accordance with the trust deed.

To conclude the use of a trust can, given the right circumstances, be a great tool as part of an overall Income Tax, Inheritance Tax and Capital Gains Tax planning strategy.

To find out more about the benefits and application of trusts to your situation please do not hesitate to contact me in Doncaster on 01302 279964 or email mstothard@hwca.com