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Flexibility is advantage for trusts

I was pleased to see that my letter, Trusts are the perfect solution, generated such interesting debate on the Money Marketing Letters to the Editor page.

A Letter to the Editor obviously cannot cover the many intricate complexities of inheritance tax planning. However, I felt that it was worth responding to the letters from Julian Stevens and Gerry Brown.

They both essentially pick up on the assertion that trusts cannot be easily broken. Perhaps I was imprecise in my choice of words and wound up, distributed or otherwise varied would be more appropriate.

However, the point that I was making was that one of the possible advantages of a gift to a trust as part of an estate planning exercise (for example, a discretionary trust) over an absolute gift, is that it can retain flexibility for the trustees/settlor.

It may defer any decisions over the application of capital and income and better protects the trust’s capital from calamities such as divorce, profligacy or silliness.

As far as getting the agreement of all the beneficiaries to bring the trust to an end, this is not usually necessary.Subject to the terms of the trust deed, it is often the trustees’ decision and theirs alone.

There are, of course, wider issues about the manage-ment of the trust, including investment of the trust funds, tax issues, etc.

My letter was not written with the intention of getting drawn into these sort of arguments, merely to point out that trusts are extremely flexible and underused vehicles.

I cannot, however, agree more with the final paragraph of Gerry Brown’s letter that the solution is dependent on the needs of each individual client.

Peter Legg

Head of inheritance tax planning matters, Vantis Tax,



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