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Use of family trusts

Produced by a Tolley Owner-Managed Businesses expert
Owner-Managed Businesses
Guidance

Use of family trusts

Produced by a Tolley Owner-Managed Businesses expert
Owner-Managed Businesses
Guidance
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This guidance covers UK resident trusts only. For information on non-resident trusts, see the UK tax position of non-resident trusts guidance note.

Trusts continue to be popular in succession planning. The potential benefits of using trusts include:

  1. •

    to give flexibility over future destination of property and to take account of future changes in the tax regime

  2. •

    protection of property from unsuitable / undesired parties obtaining control (for example irresponsible children)

  3. •

    protection of property for the benefit of certain specified beneficiaries (for example for the benefit of the deceased’s own children as opposed to step children)

  4. •

    ensure suitable destination of life policies / lump sum payments under pension schemes, etc

  5. •

    certain trusts are advantageous for tax purposes (see below)

  6. •

    lifetime transfers into trusts are generally subject to IHT at the lifetime rate of 20% (after the nil rate band) which is an improvement on the death rate of 40% applicable for transfers on death (provided the settlor survives for seven years after the transfer)

  7. •

    concealment of legal ownership by

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