Estate Planning & Trusts
A clear plan today means peace of mind and security tomorrow
Trusts Explained — A Practical Tool for Estate Planning
A trust is a legal arrangement where assets are transferred to trustees, who manage them for the benefit of chosen beneficiaries. In estate planning, trusts provide control, protection, and tax efficiency. Used correctly, they help reduce exposure to Inheritance Tax (IHT), ring-fence assets, and ensure wealth is passed on according to your instructions.
Why Use a Trust?
Trusts are used in estate planning for several key reasons:
Control: You decide how and when beneficiaries access wealth, rather than assets passing outright.
Tax efficiency: Trusts can reduce the value of your taxable estate and make use of available exemptions and reliefs.
Protection: Assets in trust are shielded from creditors, divorce settlements, or poor financial decisions by beneficiaries.
Flexibility: Different trust structures suit different goals, from family support to business succession.
Main Types of Trusts
The choice of trust depends on what you want to achieve. Common structures include:
Bare trusts: Simple arrangements where beneficiaries have immediate and absolute rights to the assets.
Discretionary trusts: Trustees decide how income or capital is distributed, allowing flexibility and control over timing.
Interest in possession trusts: A named beneficiary has the right to income, while capital is preserved for future beneficiaries.
Trusts for vulnerable beneficiaries: Tailored structures to protect children or adults with disabilities while preserving tax advantages.
Business property and agricultural property trusts: Used to secure IHT relief on qualifying assets while protecting succession.
Tax Treatment of Trusts
Trusts are subject to their own tax regime. HMRC applies specific rules on Inheritance Tax, Income Tax, and Capital Gains Tax depending on the type of trust. For example:
IHT: Transfers into most trusts can trigger a charge if above available allowances, with further charges on ten-year anniversaries and exits.
Income Tax: Discretionary trusts are often taxed at the additional rate on income retained within the trust.
Capital Gains Tax: Disposals by trustees are subject to CGT, though certain reliefs and exemptions may apply.
These rules make professional advice essential — the benefit of a trust depends on how it is set up and managed in practice.
How Citiline Helps
We work with you to identify the right trust for your objectives, explain the tax implications clearly, and handle all compliance with HMRC. From drafting the trust deed to advising trustees on ongoing reporting, our focus is on making sure the trust delivers both legal protection and tax efficiency.
📞 Considering a trust as part of your estate planning? Call Citiline today for practical, precise advice on choosing and setting up the right structure.
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