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Keep Wealth in the Family Even after Death with Trust Funds

Keep Wealth in the Family Even after Death with Trust Funds

Keeping wealth within the family isn’t limited to finding multiple sources of income, setting up a business, or saving every penny for a rainy day. There are legal methods to amassing and keeping assets that most families can take advantage of today. Best of all, these financial vehicles protect your finances from deductions that would otherwise happen without them.

One such method is inheritance tax planning (ITP), and today we’ll discover how it keeps your family’s wealth intact!

Is Inheritance Also Taxed?

Absolutely! Much like your income, the government gets a percentage of your assets upon death and audits them through Her Majesty’s Revenue and Customs (HMRC). 

When someone passes away, the government deducts a 40 per cent inheritance tax from assets amounting to over £325,000, including the nil rate band of £100,000.

However, assets you entrust to your spouse or registered civil partner are tax-exempt. Their tax inheritance allowance increases according to the amount that remains unused. This means a couple can bequeath a total of £850,000 to their loved ones without any tax deduction.

Achieving this goal requires methodical inheritance tax planning. And an excellent way to keep your assets tax-free and within your family is through using trust funds!

A Method You Can Trust

A trust fund is a form of inheritance tax planning where the benefactors legally prepare their assets to be given to a trustee so they can manage the estate for the beneficiary.

All assets transferred into trusts are no longer part of your declared estate. Since you are no longer the legal owner of said assets, these will not be counted as part of the 40 per cent inheritance tax.

Other benefits of a trust fund include:

  • Maintaining management of the trust if the beneficiary is at an age you deem fit for them to receive and handle it. This ensures the recipient is of sound mind and spends your investment wisely.
  • Easier legal identification of the beneficiary. Since the trust will be in their name, you can avoid a long probate.

It is essential to consider what kind of trust you want to get the most from your inheritance tax planning. The three most common types are:

  • Bare: Anything and everything in a bare trust fund is automatically and immediately bequeathed to the recipient. The only condition, in this case, is they must be over 18 years of age.
  • Discretionary: As with its name, the trustees (persons or institutions responsible for handling the assets have the authority to distribute the trust among the beneficiaries).
  • Interest in possession: Beneficiaries earn from this particular trust fund straightaway, requiring them to pay income tax (IT). But they will not have access to the entire amount yet.

Before setting up any trust fund, please remember the following:

  • Not every kind of trust fund is tax-exempt. Some have their internal tax set by the institution that provides them.
  • You may have to pay capital gains tax (CGT) when transferring some assets into a trust. However, when establishing a trust through a will, you don’t need to pay (CGT).
  • Trustees may end up paying 40 per cent IT and 28 per cent CGT.
  • Your estate may have to pay the full 40 per cent of inheritance tax should you die within seven years of transferring assets into a trust fund.


Saving your wealth for loved ones can be done legally through trust funds. Trustees and executors will ensure your beneficiaries receive the agreed-upon amounts to ensure they continue living comfortably even after you are gone. When uncertain, always speak with a finance professional to determine how this method can benefit your estate.

Contact Wills and Probate right now to find out the best approach to inheritance tax planning in the UK! We’re a firm that helps you secure the best future with the proper planning! Get in touch with us today!