The use of Trusts has a Long History and is a Well-Established Practice Today
LaingRose employs the time-honoured financial instruments known as ‘trusts’ in order to provide our clients with first-class wealth management.
It benefits us at periodic intervals to underline the fact that there is a clear distinction to be drawn between the respected and lawful use of trust mechanisms on the one hand, and the murky world of tax havens on the other.
Legitimate wealth management
Given the current media storm over the Panama Papers, this is probably a suitable time to remind readers that there are perfectly legitimate and respectable ways to protect individual wealth and assets. Indeed, for those unmoved by the hype, the more sober voices can be heard maintaining the consistent message that there is absolutely no need to indulge in any unseemly arrangements.
Many influential figures, such as Tony Blair and The Duke of Westminster, use trusts as part of their own personal wealth management strategy. According to HM Revenue & Customs, more than 168,000 family trusts are currently registered, generating a total of around £2.3bn a year.
Trusts date back centuries
For those who are wondering how trusts comply with the current tax code, we suggest that it is probably better to re-frame the question. Trusts have been around long before any of the tax rules and regulations that we know today. They date back at least as far as the time of the Crusades, when the knights would leave their possessions with a designated person – literally ‘on trust’.
So, why would you want to use a trust, aside from the fact that everyone else appears to be doing it? Well, there are many advantages to employing trusts.
The advantages of Trusts
Firstly, today’s family arrangements and circumstances can be quite different to those experienced 500 years ago. It is not unusual nowadays to have second or even third marriages, and trusts can be employed to ensure that your assets go to precisely those members of your family that you would like to see benefit.
Secondly, trusts afford you a degree of control both during your lifetime and after you death. For example, if you wished to pass on a large lump sum or a property to your offspring, you might not want him/her to be able to access such wealth in their first year at university, and might be wisely counselled to use the Trust mechanism to deliver the instruction that they only be able to access it once they reach the age of, say, 25.
Trusts can also be used to place assets outside of your estate so that they do not become subject to inheritance tax, currently charged at the rate of 40% for those with estates valued at £325,000 or more, or for married couples, £650,000.