TRUSTS
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T
he bene ciaries of trusts
can thank the Romans and
then the Crusaders for the
development of this very
particular way of holding
assets and passing them down the generations.
he Romans developed the basic idea and
then, as they left for the Holy Land, the
Crusaders expanded the trust principle
to enable them to undertake long voyages
without losing their lands.
And in the modern world trusts still play
an important role in many families. In fact, as
family structures become more complicated
– with family members increasingly spread
around the world, people living longer and
more getting divorced – it could be said that
the value of trusts continues to grow. So
what are the pros and cons?And what are the
points you should watch out for?
The main advantage is that donors can
make gifts without restricting themselves
too much as to who the recipients will be.
Someone with children and growing numbers
of grandchildren can set up a trust which will,
eventually, pay out to family members who are
yet to be born.
Similarly, trust assets can be protected by
excluding descendants who are in danger of
going bankrupt or those getting divorced from
being potential bene ciaries.
Divorce is one of the most common threats
to families who want to pass on money.The
problem is that someone receiving money
from their parents can nd that they have to
give away half of those assets to their former
partners in a divorce settlement.And personal
bankruptcies, which are growing more
common with more than 100,000 a year in
the UK
1
, present similar problems.
Trusts are also a way of saving Inheritance
Tax, although the amounts protected are being
reduced in some cases. Putting assets into trust
gradually removes them, over a seven-year
period, from the individual’s estate at death and
this can cut the tax bill, although there are anti-
avoidance rules that must be navigated.
Tony Müdd, divisional director of Tax and
Technical Support at St. James’s Place, believes
that the changing face of the UK tax system
could have an impact on the types of trust
Trusts play an important role with many families of today,
protecting wealth for generations to come – and as their
attractiveness increases their value will continue to grow
By Neasa MacErlean
18
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