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In the UK, advisors have historically recommended Trusts as a tax planning device for their clients. The advantages have ranged from Inheritance Tax reduction to Income Tax mitigation and Capital Gains tax deferral. However, Trusts do offer other advantages to the international investor and these are frequently overlooked by many brokers and hence their Clients could be exposed unnecessarily. Globaleye have access to very specialist Trust expertise and can design solutions tailored to individual circumstances. Here are just some of the advantages to using an offshore Trust:
Trusts can also be an ideal vehicle for protecting private assets from:
Rachel and Mark have recently sold their business and have £600,000 of Investment Capital. Although Inheritance Tax is an issue, Rachel has other concerns. Their concern is that, if their son, who is due to inherit their estate, is subsequently divorced from his wife then half of the wealth that Rachel and Mark have accumulated during their lifetimes shall be given to their then ex daughter-in-law. A Trust could be an ideal solution in this instance, although their son can potentially benefit from the Trust, if he is divorced, whatever capital is invested in the Trust cannot be attacked in the divorce settlement. Bankruptcy Paul runs his own business and during the last 10 years has assets valued at £500,000 outside of the business. On his death his estate shall pass on to his son. Paul is concerned how the business will fare after his death. A Trust could be an ideal solution for Paul's assets in that, following his death, if his son subsequently becomes bankrupt then the assets would be protected from creditors whilst the son could remain as a beneficiary of the Trust. The Trust, if correctly drafted, could ensure Paul's son has use of the capital and income in accordance with Paul's wishes after his death. Unforeseeable Creditors and Long Term Care Doug is retired and lives with his wife Gill. He has £450,000 of assets and although Inheritance Tax is an issue he has other worries. Doug is concerned that if following his death, Gill requires long-term care then his assets could dwindle away providing the care costs, thus reducing the amount his children shall eventually inherit. A Trust could be a solution in that if Doug establishes a Trust during his lifetime in which he invests his liquid assets then if, following his death, Gill requires long term care the Trust assets cannot be regarded as hers for assessment purposes although she would remain a potential beneficiary. Succession Planning - an example Trusts, unlike 'wills', cannot usually be contested; therefore, clients can be sure that the beneficiaries of the Trust (which may include the client) will benefit in the proportion of the Trust assets that are intended. Life Time Certainty Nathan has decided that on his death he wishes to pass his entire estate to his best friend and partner. His assets include his house and cash totaling £200,000. On death, the transfer to the best friend would be within the nil rate band for Inheritance Tax and therefore it is pointless to create a Trust for tax purposes, as Inheritance Tax would not be due. However, a Trust would be beneficial from the point of view of certainty of succession of funds in accordance with Nathan's wishes, if the family members' contest Nathan's will on his death. Although assets owned by Nathan personally outside of the Trust may be contested, if Nathan invested his cash or his property into a Trust then these could not be contested and therefore the asset would pass onto the best friend on death (subject to Nathan's children being financially independent). This benefit also applies for clients who wish to change their wills in favour of other family members, but who fear that this may be contested on their death, or have estates in excess of the nil rate band and want some IHT planning. Anonymity There are a variety of legitimate reasons why someone would wish to preserve anonymity. Commercial anonymity may be desirable where negotiations for patents, trademarks, royalties or distribution rights are concerned. Financial anonymity may sometimes be considered desirable where knowledge of provisions made for beneficiaries could complicate new relationships. Delaying the Receipt of Capital to Children and Issue Ben is retired and wishes to leave his assets to his son and niece on death. As his total assets are less than the nil rate band for Inheritance Tax purposes there is no Inheritance Tax liability and therefore it is likely that a Trust would normally not be considered. Ben, however, is concerned that after receiving his estate upon death, his son and niece may embark on a spending spree and waste the Inheritance. A Trust could be ideal in these circumstances as Ben could instruct the Trustees that, following his death; payments are paid to his son and niece each year at their discretion. Alternatively, Ben could instruct the Trustees to defer payment to his son and niece until either an event takes place, for example marriage, or a certain age is attained. Continuity of Ownership Ricky owns shares in a new business. He may wish to diversify the ownership of the shares to his children and heirs. Under the new Capital Gains Tax regime any transfer of shares will result in Ricky loosing the period of Taper Relief he is entitled to for holding shares in a qualifying trading company and the Taper period will start again. A Trust will allow beneficiaries interests to be varied without a transfer of shares and therefore no loss of Taper Relief. Whatever your concerns about protecting your estate, whether it is your business, property, pensions funds, life insurance or works of art, contact Globaleye for an initial consultation without obligation.
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