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Similar to a Will Trust, an Asset allocation Trust protects assets but are activated immediately as opposed to upon death.
Am Asset Allocation Trust enables the ownership of an asset to be transferred in whilst an occupant continues to reside and live in the property. However, it is important to seek the correct advice with it comes to the assessment of care costs as this mechanism does not automatically deem an occupant exempt from care costs.
This is a Trust set up in your life to protect assets for future generations and protect them from third party creditors.
An example of such Trusts which is designed for homeowners involves the transfer of their home into a Trust. For most, ownership of their home does not always mean they are wealthy – at least not in the sense of having money to spend. Even with increasing property values homeownership usually revolves around practical issues such as having a place to live or an inheritance for children/grandchildren.
Under the terms of the Trust, you can continue to live in the property for the rest of your life or until you decide that the residence is no longer required or appropriate. Despite the fact that the Trust will legally own your home you still retain the benefits and flexibility of homeownership and should you wish to move in the future you are able to under the same terms. This trust is designed for our clients who wish to continue living in their home for the rest of their lives but are concerned about how their property, or its proceeds of the sale, will be used on their death.
Individual circumstances vary a great deal and it is impossible to state categorically whether this or any other method of Estate Planning, is best for you without carrying out a thorough review of your affairs.
Asset Allocation Trust FAQs
What is an Asset AllocationTrust and how it is different from a Will Trust?
An Asset Allocation Trust is established whilst a person is alive and is created separate from a Will, unlike a Will Trust. However, just like a Will Trust, it is a specific mechanism that protects an asset; namely a property.
Why would you create an Asset Allocation Trust and place your property within it?
There are many tax implications of establishing an Asset Allocation Trust but it can ensure specific properties are passed to certain beneficiaries prior to the original owner passing away. This can be attractive to those with multiple marriages and/or partners across their lifetime. Also, it ensures the property is passed to the intended beneficiaries even if a Will is not present.
What are the tax implications of establishing a Lifetime Trust?
Tax advantages should never be the main reason for establishing an Asset Allocation Trust. If the property is over the current threshold of £325,000, it can still be liable for Inheritance Tax and those who place properties into an Asset Allocation Trust may incur an immediate 20% charge on any balance over £325,000. The property may attract an annual 6% tax liability on the value above £325,000, too.
What is the first step to establishing a Bloodline Trust?
Speak to a professional and trusted adviser in complete confidence. The taxation landscape alone is an extremely important element to consider, with legislation being open to change it these politically volatile times. By not following correct advice, or taking it upon yourself to establish the facts, you can end up far worse off and paying vast sums of taxation to HMRC.
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