Document and pen

Financial advisers agree trusts can offer advantages over a will

Some 89 per cent of financial advisers in the UK agree trusts can offer advantages over a will, according to a survey conducted by Skandia International, part of Old Mutual Wealth.

The survey also revealed that only around 22 per cent of UK advisers’ clients hold a trust, compared to 60 per cent that hold a will, showing clear potential for more people to benefit from holding a trust.
The advantages of trusts over wills are ranked in order, with advisers stating no probate as the top advantage, closely followed by inheritance tax and more certainty and protection as other key advantages.
Probate was ranked the number one advantage of trusts over wills. Assets held within a trust sits outside of the person’s estate, so is not subject to probate, unlike those assets that fall within the estate. This has many advantages, but is most prevalent in scenarios where the proceeds from the trust can help surviving family members meet immediate financial liabilities rather than having to wait months or even years for the estate to be settled.
The second highest advantage stated by advisers for trusts over wills is inheritance tax. For those advising UK clients or those with UK situated assets, inheritance tax is a key consideration, and has been stated by advisers as the number one reason for recommending trusts. As assets placed inside a trust sits outside of the person’s estate, it is potentially exempt from inheritance tax, saving a substantial 40 per cent tax.
Advisers ranked more certainty and protection as the third highest advantage for trusts over wills. With a trust, people are able to specify exactly who the beneficiaries are; this can be an absolute entitlement or a discretionary entitlement. The settlor can remain in control of the trust during their lifetime, giving them more certainty that their wishes are being met. The trust can continue long after the settlor dies, whereas a will looks to distribute assets on death. As the trust sits outside of the estate, this can also provide protection from any creditors to the estate.
Privacy was ranked the fifth highest advantage. A will is a public document, whereas a trust is a private document, which could be an important factor for some people. Anyone wanting their financial affairs and their beneficiaries to be kept strictly private may like the discretion trusts provide.
Gordon Andrews, technical marketing manager, Skandia International, says: “Interestingly nearly half of all UK advisers surveyed (49 per cent) say they have used a trust instead of a will, highlighting the numerous advantages trusts can provide over wills. However, it’s not a case of one or the other, but more a case of understanding why someone could benefit from having both a will and a trust in place to help meet all their financial needs. With only around 22 per cent of advisers’ clients holding a trust, there is a clear opportunity for more people to benefit from this aspect of financial planning.”

Further reading

Upcoming events

4 weeks 6 days from now - Hong Kong
4 weeks 6 days from now - Ulaanbaatar
5 weeks 23 hours from now - Dublin
5 weeks 5 days from now - California
5 weeks 5 days from now - California

Upcoming training

Sun, 24/08/2014 (All day) - Dubai
Wed, 10/09/2014 (All day) - London
Mon, 29/09/2014 (All day) - London