Living Trust Planning – Start with clarity from Sanctuary Tax & Trust

In the absence of a Will it is generally assumed any assets will pass to a surviving spouse or in the absence of a spouse, the children. This is not guaranteed to happen and it is the Laws of Intestacy that will determine who receives a benefit and the size of that benefit. Additionally, in the absence of a Will the probate process is an even more complex process then if there is a valid Will in place.

Choosing the right witnesses is an essential step in ensuring your Will is valid and your wishes are honoured. Always avoid anyone who stands to benefit from your Will or their close relatives, and ensure your witnesses are independent adults of sound mind.

An executor is a person or institution appointed in your Will to carry out your wishes after you pass away. Their main role is to manage your estate—this includes collecting all your assets, paying off any debts or taxes, and ensuring that what remains is distributed to the people or organisations you have named as beneficiaries.

Probate is the legal process involved in dealing with the estate of a person who has died. It ensures that the deceased person's assets, such as money, property, and possessions, are distributed according to their will (if one exists) or, if there is no will, in accordance with the laws of intestacy. The process involves proving the validity of the will (if present), identifying and valuing the estate, paying any debts or taxes, and distributing what remains to the rightful beneficiaries. The cost of probate can vary significant depending on the value and complexity of the estate, as well as whether you use a solicitor or professional service to assist with the process. The duration of the probate process depends on various factors, including the complexity of the estate, whether there is a will, and if any disputes arise among beneficiaries.

Secure document storage is a vital part of safeguarding sensitive information and maintaining trust. Following best practices for both physical and digital documents and staying aware of legal obligations is important. Storage certificates can be provided to the family and the Wills register states where documents are held, and withdrawal procedures.

If you are concerned about your child's partner potentially inheriting from your estate, you are not alone. Many parents have similar concerns, especially when family relationships are complex. Simply leaving your estate to your child in a Will may result in their partner benefiting. Once probate is complete, your child assumes ownership of the assets, and their subsequent decisions determine the outcome. Establishing Trusts within your Will or creating a living Trust can safeguard your estate, ensuring it benefits your child and remains within your bloodline thereafter.

In summary, a will is a straightforward document for distributing assets after death, while a trust offers greater flexibility and control, potentially avoiding probate and safeguarding the assets it holds. A Will is a wish a Trust is Law.

The main differences between a Will Trust and a Living Trust are when they take effect, how assets are managed, and whether probate is required. A Will Trust only comes into force after death and requires probate, while a Living Trust is active during the settlor’s lifetime and can help avoid probate. The right choice depends on your personal circumstances and estate planning goals. Essentially the assets that pass into a Will Trust is what is owned or left at the point of death. The assets held in a living Trust are protected during the Settlors lifetime for the beneficiaries on the Settlors death.

Generational Inheritance Tax refers to the inheritance tax liabilities that arise when wealth is transferred from one generation to the next, typically upon death. One of the main challenges with generational IHT is the potential for wealth to be taxed multiple times as it passes from one generation to the next. For example, if assets are passed from a parent to a child and then, upon the child's death, to a grandchild, IHT could be payable at each stage. This can significantly erode family wealth over time. Transferable pensions are also becoming part of the IHT calculation from April 2027. Again this can significantly impact family wealth. For Example, your child will be working and paying into a transferable pension, their partner will be doing the same, if they own property and have savings all will be part of their IHT calculation. When you transfer your wealth to your child with a Will, two estates become one. Meaning, for each £100,000 of assets you pass in excess of your tax free allowances - there would be a tax loss of £40,000. When your child passes to theirs, the loss would be prevented with a Trust. Generational IHT is a critical aspect of estate planning for families wishing to preserve wealth across generations. By understanding the rules, exemptions, and reliefs, and by implementing strategic planning, families can significantly reduce the impact of inheritance tax and secure a lasting legacy for future generations.

A correctly planned trust should offer multiple benefits such as reducing or eradicating probate, preventing sideways disinheritance, providing for benefit dependant children, protecting assets from insolvancy for business owners and preventing unwanted claims against an estate.

Your ability to make changes to your trust depends on its structure and terms. Providing Trusts are written correctly, the Settlor has the power to remove Trustees or beneficiaries or transfer Trust assets back to themselves. Legal advice is strongly recommended to ensure that any amendments are valid and enforceable under British and Irish law.

The seven year rule states that gifts given to individuals are exempt from inheritance tax if the person making the gift survives for seven years after making it. If the donor passes away within seven years of giving the gift, the value of the gift may be subject to inheritance tax, depending on the timing and amount.

You are never too old to consider IHT planning. While some options are more effective when started earlier, there are always steps you can take to ensure your estate is managed in the most tax-efficient way possible. It is wise to seek professional advice to explore the best strategies for your situation and to act as soon as possible to make the most of the available allowances and exemptions.

When planning your estate, selecting the appropriate professional is essential. Solicitors and Estate Planners each offer distinct expertise; solicitors typically act on instruction rather than providing advice. In our experience, clients who engage solicitors often receive Mirror Wills or Trust Wills, which may not always offer optimal protection. We present all available options, enabling clients to make informed decisions best suited to their needs.

Local authorities will always assess potential Deprivation of Assets, focusing on the timing and intent behind the establishment of a trust. If the trust was created prior to any care needs, for legitimate estate planning purposes such as, protecting beneficiaries from relationship breakdown, preventing sideways disinheritance, avoiding probate, or enhancing tax efficiency preventing generational IHT then, assets are held correctly and not for the purpose of avoiding the care charge.

Many individuals contemplate transferring ownership of their home to their children as a means of safeguarding the property from being used to fund future care home fees. While this approach may appear straightforward, it is crucial to fully understand the associated legal and financial implications within the UK and Ireland. Transferring ownership of your home to your children is legally permissible. However, this is a significant decision with far-reaching consequences. Once the property is registered in your children's names, you relinquish all legal ownership and control. Consequently, you may lose your right to reside in the property should circumstances change—for example, if your children choose to sell the property or encounter financial difficulties such as divorce or bankruptcy. It is important to note that only a person's principal place of residence is exempt from Capital Gains Tax (CGT). If your beneficiaries do not reside in the property, a CGT liability may arise, calculated at 24% of the increase in value from the date of transfer to the date of sale. The longer the period between transfer and sale, the greater the potential tax liability. The primary legal rationale for gifting assets, including cash and property, during one’s lifetime is to mitigate Inheritance Tax (IHT). For a gift to qualify as a Potentially Exempt Transfer (commonly referred to as the seven-year rule), the donor must relinquish all benefit from the asset. If the property is gifted but the donor continues to reside there, the benefit is not considered relinquished unless full market rent is paid to the beneficiary. For IHT purposes, a married couple or widowed individual benefits from a threshold of £1 million, while a single or divorced individual has a threshold of £500,000. If the total value of the estate, including property and savings, is below the relevant threshold, there is no IHT liability to reduce. Should a property be gifted from an estate valued below the threshold, this may be deemed Deprivation of Assets and could be challenged by the Local Authority, resulting in the gift being invalidated. To address these complexities, establishing a Common Intention Trust may be a suitable option.