Trusts

Do you need to gain control, ensure protection, and want peace of mind, knowing your wealth will be used exactly as you intend?

Control, protection, and peace of mind

Setting up a trust can provide control, protection, and peace of mind, ensuring your wealth is used exactly as you intend.

At DG Financial Services Ltd, we demystify trusts, providing clear guidance on how they can fit into your overall estate and Inheritance Tax (IHT) planning.

What is a trust?

A trust is a legal arrangement where you (the ‘settlor’) give assets—such as money, property, or investments—to trustees. The trustees are legally responsible for holding and managing these assets according to your instructions for the benefit of the people you have named (the ‘beneficiaries’).

Think of it as placing your assets in a secure box. You decide what goes in the box, who looks after it (the trustees), who gets things from the box and when (the beneficiaries), and you write the instruction manual (the trust deed).

This separation of legal ownership (held by the trustees) from the beneficial enjoyment (for the beneficiaries) is what makes trusts so flexible and effective for estate planning.

What might bring you here?

Key gifting allowances

Clients often approach us about trusts to address a specific issue or achieve a particular objective.

Your own situation might be similar to one of these common scenarios:

You want to provide for young children or grandchildren

You want to set money aside for their future, but feel they are too young to manage a large inheritance. A trust allows you to specify that the funds are received at a certain age, such as 21 or 25.

You are concerned about Inheritance Tax

You want to reduce the value of your estate for IHT purposes by gifting assets, but you are not yet ready to give your beneficiaries complete control over the money.

You want to support a vulnerable beneficiary

You need to provide for a loved one who may not be able to manage their own financial affairs due to a disability or other personal circumstances. A trust can ensure they are cared for throughout their lifetime.

You are a business owner

You want to pass on shares in your family business in a controlled way, perhaps ensuring the business stays within the family line.

You want to protect assets from future risks

You are concerned that a beneficiary’s inheritance could be at risk from a future divorce or financial difficulties. Assets held in certain types of trust can offer a layer of protection.

Whatever your reason, a trust can provide a tailored solution to meet your specific wishes.

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Common types of trusts in the UK

There are several different types of trusts, each with its own rules and tax implications. Choosing the right one is essential and depends entirely on what you want to achieve.

Here are a few of the most common types:

1. Bare trusts (or Absolute Trusts)

This is the simplest form of trust. The assets are held in the name of the trustee, but the beneficiary has the absolute right to them upon reaching the age of 18 (in England and Wales). The assets and any income they generate are treated as belonging to the beneficiary for tax purposes. These are often used to hold assets for children.

2. Discretionary trusts

This is a highly flexible type of trust. The trustees are given discretion over how to use the trust’s income and capital. They can decide which beneficiaries to pay, how much to pay them, and when. The settlor provides guidance in a ‘letter of wishes’, but the final decision rests with the trustees. This flexibility is useful when you are unsure of your beneficiaries’ future needs.

3. Interest in possession trusts

With this type of trust, a beneficiary (known as the ‘life tenant’) has the right to receive all the income generated by the trust’s assets for a specific period, often for the rest of their life. For example, a surviving spouse might receive the income from an investment portfolio. The life tenant does not have a right to the capital itself, which passes to other beneficiaries (the ‘remaindermen’) after the life tenant’s right to income ends.

Trusts can help with Inheritance Tax planning

Trusts can be a very effective part of an Inheritance Tax (IHT) strategy. By placing assets into a trust, you can potentially remove them from your estate for IHT calculation purposes.

Generally, for a gift into a trust to be effective for IHT, you must survive for seven years after making it—similar to the ‘seven-year rule’ for outright gifts.

However, the tax treatment of trusts is complex. The type of trust you choose and the value of the assets you place into it will determine the tax implications, which can include not only IHT but also Capital Gains Tax and Income Tax. This is an area where professional financial and legal advice is not just recommended, but essential.

How our service supports you

Trusts provide a sophisticated means of managing your wealth and protecting your legacy. They provide control and flexibility that a simple will or gift cannot always match. However, they require careful setup and ongoing management to be effective and compliant.

At DG Financial Services Ltd, our highly experienced independent financial advisers will help you explore whether a trust is the right solution for your family. We work with you to understand your goals, explain your options in plain English, and help you create a robust plan that gives you confidence in the future. We don’t believe in one-size-fits-all solutions or generic advice that overlooks your personal circumstances and dreams.

What to expect when you work with us

Our expertise simplifies complexities of trusts to bring you clarity and empowerment:

Initial consultation

We’ll start with a confidential, no-obligation meeting to listen to your situation, understand your concerns, and identify your immediate priorities.

Financial review

Our team will conduct a thorough review of your shared and individual finances to create a complete picture of your assets, liabilities, and future needs.

Strategic plan

We will develop a clear, personalised financial plan with actionable steps, helping you move towards financial independence.

Ongoing support

As you implement your plan, we remain available to answer your questions, adjust to any changes, and provide continuous guidance.

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Securing your retirement lifestyle

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