One of the most important aspects for those who have gained wealth and are nearing retirement are trusts. These are tools when used right can mitigate tax legally and pass on investments, property, and money to a spouse, partner, or family member.
Trusts are usually used for inheritance tax planning, to mitigate probate, or give gifts to family members to reduce inheritance tax. They can be used in a way that can give you access to your capital or protect it until you die or even pass it on to your grandchildren and skip out your children. There are a variety of trusts that are deemed liable and safe, however choosing one which is most suitable to you is dependent on your circumstances and will have to ask yourself how much will you need liquid and which provider you like the best.
Before we go on lets go though some brief terminology used with trusts:
- Trust Settler – Is the person with the funds and is funding the investment
- Trustee -This is the person that the settler appoints to secure the investment, they must understand the legal roles of the trust and be over 18 years old and of sound mind.
- Beneficiary -This is who the settler appoints to be the beneficiary of the investment. The beneficiary can take a few kinds within a trust
What Trusts Are There For Expats?
I will for the sake of simplicity stick it to the main trusts that are used and appreciate that there are more trusts out there that you can use. This is the most common and one we use most.
Bare Trusts
This is when the property goes straight to the trustee passed by the settler. This is the most straightforward of the trusts and is used when the settler passes the trust through a way of a gift. These are most suitable for individuals that are looking to pass on assets that they will not need personal access to in the future. They also know who they wish to be the beneficiaries, and looking to reduce inheritance tax.
Loan Bare Trust
This is when the settler gives the growth as a gift to the beneficiaries but still remains in control of the trust. These trusts have in mind a person that can afford to gift away the growth of the trust, however, they want to obtain access to the trust.
Discretionary Trust
This is when a settler gives more control to the trustee who can then, therefore, generate more control over how much gets given out when payments are made and even to whom the beneficiary stands. These are mostly used if, for example, you have young Grandchildren.
Accumulation Trust
This is when the trust can gain accumulation and added back in to the trust.
Mixed Trust
Is where you hold more than one trust. You can gift individual trusts to individuals or groups.
Offshore Trust
When you put trust in an offshore jurisdiction and then become bound to the local laws.
Most expats are overseas business people who reside or take citizenship offshore. They will have access to both the onshore and offshore trust and will normally be needed if they have a significant amount of cash, stock investment, property, business, or assets (significant amount would be deemed as anything over the lifetime amount for your countries inheritance tax).
Expats should look at trusts as a way of passing on the assets to whom they wish, a trust enables them to do so in a most efficient controlled manner that can potentially mitigate the tax for their family or loved ones.
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If you are interested in finding out more about trusts, want to set up a trust or you want to know more about your position in relation to inheritance tax (IHT) then please email me at info@investmentsforexpats.com
