- Convenience – the beneficiary may be a minor who is unable, as yet, to take responsibility for the property themselves, or the settlor may be looking for flexibility to provide for a class of beneficiaries who might not even be born at the time the trust is created (such as grandchildren).
- Reduce taxation – property placed within a ‘Discretionary’ trust does not normally form part of the settlor’s estate on death (unless the trust is one where the settlor retains an interest) and as such this reduces any inheritance tax that may be due.
- Protect the property — this is the main reason that trusts are created – in case:
o the beneficiary turns out to be someone who cannot manage the property themselves, oro the property would otherwise need to be sold to pay for long-term care, oro to protect the property from potential bankruptcy or divorce.
- ‘Nil rate band’ trusts.
- ‘Charge’ trusts.
This tip was first printed in Tax Insider in December 2016.