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IPDI vs FLIT

By | Trusts | No Comments

Complex families often come with complex requirements to meet their long-term goals, and matters can be made more difficult when each testator has separate goals or concerns in mind. These goals usually revolve around the inheritance the children are to ultimately receive and when they receive it, and it certain cases, if they inherit at all. Using a Life Interest of the Residuary Estate can cater for most family needs for a number of reasons; On first death, the surviving spouse will be the Life Tenant. They will be entitled to all income generated by the trust and the trust can allow them access to the use of capital at the Trustees’ discretion if desired; All Life Interest Trusts allow the use of the Transferrable Nil-Rate Band (TNRB) between spouses; Each testator can appoint separate beneficiaries from each other; If the Trustees are given the power to advance capital, it…

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Discretionary Trusts, WillPack, House, Money, Table

Discretionary Trusts

By | Property, Trustees, Trusts | No Comments

The Discretionary Trust is a common Trust for a Testator to use for their children to ensure that they do not inherit directly from their estate. The reasons for this can vary, for example, protecting assets from potential divorce, drinking or gambling issues, or the testators may wish that their assets are distributed in a particular manner or at certain points in their children’s lives that are outside the capabilities of the Will itself. This type of trust is effective because the assets are held and managed by the Trustees to distribute to the beneficiaries at their own discretion, hence the name of the trust and just because a beneficiary is named under the trust does not mean that they are absolutely entitled to any assets – useful where the Trustees may have concerns over how the money may be used.  Where beneficiaries are named under the Trust; this can…

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Commercial LPAs. What they are and what they do!

By | Commercial, Legal, LPA, Uncategorized | No Comments

Commercial LPA Many business owners, partners and directors may not consider what would happen to their business should they be unable to make decisions for their business in the case of their mental incapacity, or if they plan on leaving the country for a long period of time. The answer could be an LPA. For many Partnerships, LLPs and companies, under the Mental Health Discrimination Act 2013, in the case of a Director/Partner losing their mental capacity they cannot be removed as a Director for that company. This will leave the company in a difficult position, where the best way around this, is to apply for a Deputyship, which as we all know is a timely and costly procedure. For a Sole Trader, if they lose their mental capacity, in most cases this would result in losing the business as there is no one able to take it on and…

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Introduction to Guardianship

By | Guardianship, Inheritance, Intestacy, Legal, Uncategorized, Wills | No Comments

Appointment of Testamentary Guardians The appointment of testamentary guardians is rarely considered by parent, but it is highly desirable that they should consider who should look after their children if both were to lose their lives while their children are under eighteen. The appointment of a testamentary guardian can only be made by a person with parental responsibility. What is Parental Responsibility? The legal definition of Parental Responsibility is the rights, duties, powers, responsibilities and authority which by law a parent has in relation to their child and their property. This includes: Providing them with a home maintaining them Choices about their medical treatment How and where they are educated Deciding their name It does not include a duty to maintain the child financially, all parents have this duty regardless of whether they have parental responsibility. More than one person can have parental responsibility for the same child at the…

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Flexible Life Interest Trust

By | Inheritance, Legal, Property, Trustees, Wills | One Comment

Flexible Life Interest Trust  Due to more complex estates and greater wealth, greater flexibility is essential to cope with any future changes to the family structure (such as new family members) and changes in the tax regime. The best way to gain the maximum flexibility is by the use of a Flexible Life Interest Trust (FLIT). How a FLIT works The residue of the estate is held on trust for the surviving spouse or civil partner for their lifetime, after which or when the life interest is ended, a discretionary trust will arise in favour of nominated beneficiaries, usually children and issue. Trustees are given a number of powers. They can grant the income of the trust fund to the surviving spouse/civil partner and have the power to grant the capital of the trust fund to them as either absolutely or as a loan, which would be repaid when the…

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Roles of executors and trustees

By | Executor, Inheritance, Legal, Trustees, Wills | 2 Comments

Who are trustees? A trustee is someone who is given legal responsibility to hold property in the best interest of or for the benefit of someone else (the beneficiaries). As the name implies, the trustee acts under a “trust” to do what is best and to act in the interests of the beneficiaries and not themselves. Number of trustees No more than 4 trustees can be appointed to act at once, however reserve trustees can be appointed. If the property of the trust includes land a minimum of 2 trustees must be appointed. Where a Trust is inserted within a Will in favour of a spouse (as a beneficiary) upon first death, it is almost always advisable that a MINIMUM of two other trustees be appointed to act jointly with the spouse. This is in order to prevent any conflict of interest due to the spouse acting as the sole…

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Could Changes to the Taxation of Pilot Trusts Affect You?

By | Food for thought, Legal | One Comment

Following the Chancellor’s Autumn Statement at the end of 2014, legislation is now going through parliament which aims to limit the use of ‘pilot’ trusts. Pilot trusts are an accepted form of Inheritance Tax (IHT) planning, commonly used to reduce the impact of the special IHT regime which applies to trusts, known as the ‘relevant property regime’. If a trust falls within the relevant property regime, the assets do not form part of the estates of any of the beneficiaries of the trust. Instead, there are potential charges to IHT when capital leaves the trust by way of outright distribution (an ‘exit’ charge) and on each tenth anniversary of the creation of the trust (a ‘periodic charge’). The calculation of these charges is complex but, broadly, they only apply to the extent that the trust fund exceeds the available nil rate band (currently a maximum of £325,000) at the time…

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