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06/03

Financial advisers agree trusts can offer advantages over a will

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

6 March 2014

89% of financial advisers in the UK agree trusts can offer advantages over a will, according to a new survey* conducted by Skandia International, part of Old Mutual Wealth. The survey also revealed that only around 22% of UK advisers’ clients hold a trust, compared to 60% 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.

Ranking Advantage of a trust over a will
1st No probate
2nd More inheritance tax options
3rd More certainty and protection
4th Use of nil rate bands every 7 years
5th More privacy

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 2nd 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% tax.

Advisers ranked more certainty and protection as the 3rd 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 5th 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, comments:

“Interestingly nearly half of all UK advisers surveyed (49%) 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% of advisers’ clients holding a trust, there is a clear opportunity for more people to benefit from this aspect of financial planning.”

*The quarterly international adviser confidence barometer was conducted by Skandia International, part of Old Mutual Wealth, in Q1 2014, responses from 498 advisers from around the word, 144 UK advisers.

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