Trusts

speakswan

Hi,
I have recently become a Dad and I am about to change my will. In the event of my death I would like to create a trust for all my assets (that do not go to my wife) to go to my daughter. I was wondering if someone can tell me how long you can create a trust for? I think you can create a discretionary trust but is anyone aware of the tax rates once the youngest beneficiary passes 21?

I understand that this is an unusual area and will take all replies as guidance and I will undertake professional advice before creating a trust but would love to have a better knowledge of the whole area.

censuspro

Trusts are a tricky area that alot of people stay away from. A few things you should know are:

• The creation of a trust is a disposal for capital gains tax (CGT), in effect when you settle assets in trust, you or your estate is deemed to have sold the assets resulting in a potential CGT liability.
• When you settle assets on trusts for the benefit of a minor (<18) then the settlor is taxable on any income arising from those assets, unless the income is to be accumulated in the trust and paid out when the minor comes of age.
• Discretionary trusts are liable to an annual surcharge

In your case, if you died and your estate settled assets in trust for the benefit of a child under the age of 18 and any income is to be accumulated in the trust. The estate would have a potential CGT liability on creation of the trust, there were be an annual surcharge on the trust and any income arising from the assets in the trust would be a tax liability of the trustees and on the child becoming beneficially entitled to the assets (21) they would would subject to CGT.

I hope that makes sense.