Archive for the ‘Finance’ Category
Michael Challiner asked:
In his spring Budget the Chancellor Gordon Brown announced swinging measures to tackle the use of Trusts being used to avoid Inheritance Tax. The immediate reaction amongst the financial and legal fraternity amounted to panic and confusion. Within ten days of the budget speech the estimates of the numbers of people that could be hit by the new anti-trust provisions hit 4.5 million.
Then, following the publication of the draft Finance Bill, the estimates fell to 1 million people. So, with specific reference to life insurance policies written in trust, what’s happening?
Well firstly before we go any further, we have to make the point that this article is commentating on the position based on the first draft of the Finance Bill – and it’ll be early July 2006 before that bill becomes law. As I write, the legislation still has to pass through parliament and it’s possible that the situation could change yet again. If it does I will keep you informed.
Within weeks of the budget speech, the Government retreated from its previously held position that all life policies written in trust are caught by the new legislation. The current position is that if your life insurance policy was written in trust before budget day 2006, then the money in the trust remains totally free of tax and fees. The legislation is not now to be retrospective. That’s one headache dispensed with.
However, if your policy was written in trust after the Spring Budget Day in 2006, then the new tax rules do apply.
For most people, the purpose of writing a life insurance policy in trust is to ensure that the policy pays out quickly and directly to where you want the money to go – often to a mortgage provider to repay the mortgage or to beneficiaries in the family to allow them to spend straight away as they like and tax free. These trusts that break upon death, are not now affected by the new regulations. That’s because only trusts that continue to hold money after the policyholders’ death are targeted by the new rules.
New life insurance policies written in trust will now be caught by a tax charge if the policy’s payout makes the deceased’s estate exceed the Inheritance Tax Threshold (IHT) of £285,000 and the policy is written in a type of trust known as an “interest-in-possession” trust.
Interest-in-possession trusts have been used to hold and invest the money paid out from a life insurance policy and pay the trust’s income to the spouse. The capital then passes to the children on the death of the spouse. Following the budget, these arrangements will be subject to a 40% IHT charge when then money passes into the trust for your spouse – plus a 6% tax charge every ten years and an “exit fee”. These taxes can be avoided if the you give your spouse significant control over the trust, which many people may perhaps not want to do especially if they are in a second marriage with children from previous relationships. The alternative is to use a bare trust as this type of trust is not caught by the new regulations. However, if you do use a bare trust, the money automatically goes to your children when they reach the age of 18.
If you are buying a new life insurance policy and want to use it to pay off a mortgage or provide immediate money for your family if you were to die, then you should still consider writing our policy in trust. However, it becomes more important than ever to buy the policy through a broker who is fully versed in the current requirements for trusts and can ensure you get exactly the type of trust you need.
Jeremiah Clagon
In his spring Budget the Chancellor Gordon Brown announced swinging measures to tackle the use of Trusts being used to avoid Inheritance Tax. The immediate reaction amongst the financial and legal fraternity amounted to panic and confusion. Within ten days of the budget speech the estimates of the numbers of people that could be hit by the new anti-trust provisions hit 4.5 million.
Then, following the publication of the draft Finance Bill, the estimates fell to 1 million people. So, with specific reference to life insurance policies written in trust, what’s happening?
Well firstly before we go any further, we have to make the point that this article is commentating on the position based on the first draft of the Finance Bill – and it’ll be early July 2006 before that bill becomes law. As I write, the legislation still has to pass through parliament and it’s possible that the situation could change yet again. If it does I will keep you informed.
Within weeks of the budget speech, the Government retreated from its previously held position that all life policies written in trust are caught by the new legislation. The current position is that if your life insurance policy was written in trust before budget day 2006, then the money in the trust remains totally free of tax and fees. The legislation is not now to be retrospective. That’s one headache dispensed with.
However, if your policy was written in trust after the Spring Budget Day in 2006, then the new tax rules do apply.
For most people, the purpose of writing a life insurance policy in trust is to ensure that the policy pays out quickly and directly to where you want the money to go – often to a mortgage provider to repay the mortgage or to beneficiaries in the family to allow them to spend straight away as they like and tax free. These trusts that break upon death, are not now affected by the new regulations. That’s because only trusts that continue to hold money after the policyholders’ death are targeted by the new rules.
New life insurance policies written in trust will now be caught by a tax charge if the policy’s payout makes the deceased’s estate exceed the Inheritance Tax Threshold (IHT) of £285,000 and the policy is written in a type of trust known as an “interest-in-possession” trust.
Interest-in-possession trusts have been used to hold and invest the money paid out from a life insurance policy and pay the trust’s income to the spouse. The capital then passes to the children on the death of the spouse. Following the budget, these arrangements will be subject to a 40% IHT charge when then money passes into the trust for your spouse – plus a 6% tax charge every ten years and an “exit fee”. These taxes can be avoided if the you give your spouse significant control over the trust, which many people may perhaps not want to do especially if they are in a second marriage with children from previous relationships. The alternative is to use a bare trust as this type of trust is not caught by the new regulations. However, if you do use a bare trust, the money automatically goes to your children when they reach the age of 18.
If you are buying a new life insurance policy and want to use it to pay off a mortgage or provide immediate money for your family if you were to die, then you should still consider writing our policy in trust. However, it becomes more important than ever to buy the policy through a broker who is fully versed in the current requirements for trusts and can ensure you get exactly the type of trust you need.
Jeremiah Clagon
Peter Kenny asked:
A living trust may be the right choice for some consumers but it is not the right choice for all consumers. This article looks at some of the more common issues associated with living trusts.
First of all, it should be understood that a living trust is not the same as living will. They are two different things and should not be confused, one with the other. A living trust is a legal document that ensures that a person’s property is dispersed according to his or her wishes upon death. It can also be used to include issues concerning minor children and who the deceased wishes to have as guardian for those children.
A living will, on the other hand, is a legal instrument that carefully details the types of medical treatment a person wishes to receive, or not receive, should that person become incapacitated through illness or injury.
When you work with a living trust, you actually transfer ownership of your assets to the trust. You then appoint someone to act as the trustee and that person will administer the trust. The trustee may be a family member, attorney, friend, or even a business establishment such as a law firm.
By having a living trust, you can save your family and others some problems that might pop up later on after your death. The main issue that it can deal with is probate. A living trust does not have to go through probate court because your assets are technically no longer yours; they are owned by the trust. Only those items that are still in your name will be subject to probate. In order to keep your family from having to go through probate, however, you must make sure that all property has actually been transferred out of your name and into the trust. If you fail to do this, the living trust is void and the state controls the distribution of your property. If minor children are involved, the state will decide who raises them.
If you are considering the use of a living trust, be very careful with whom you work with. There are companies out there who will happily take your money in exchange for what they call “do it yourself” kits that are all but worthless later on when they are needed. The best way to make a living trust is to do it through a reputable attorney. In fact, some states will not allow validity of any living trust that is not handled through a law professional.
You should also be aware of the fact that a poorly written living trust can actually cost your loved ones more money than they might want or be able to spend. It is very important that you take the time to have your living trust set up properly and that you transfer your assets into the trust as required. No one likes to think about their own demise, but no one wants to saddle those left behind with undue burdens either. This can be especially important if you have minor children who will need a guardian in case you are not around to take care of them.
Janita Copier
A living trust may be the right choice for some consumers but it is not the right choice for all consumers. This article looks at some of the more common issues associated with living trusts.
First of all, it should be understood that a living trust is not the same as living will. They are two different things and should not be confused, one with the other. A living trust is a legal document that ensures that a person’s property is dispersed according to his or her wishes upon death. It can also be used to include issues concerning minor children and who the deceased wishes to have as guardian for those children.
A living will, on the other hand, is a legal instrument that carefully details the types of medical treatment a person wishes to receive, or not receive, should that person become incapacitated through illness or injury.
When you work with a living trust, you actually transfer ownership of your assets to the trust. You then appoint someone to act as the trustee and that person will administer the trust. The trustee may be a family member, attorney, friend, or even a business establishment such as a law firm.
By having a living trust, you can save your family and others some problems that might pop up later on after your death. The main issue that it can deal with is probate. A living trust does not have to go through probate court because your assets are technically no longer yours; they are owned by the trust. Only those items that are still in your name will be subject to probate. In order to keep your family from having to go through probate, however, you must make sure that all property has actually been transferred out of your name and into the trust. If you fail to do this, the living trust is void and the state controls the distribution of your property. If minor children are involved, the state will decide who raises them.
If you are considering the use of a living trust, be very careful with whom you work with. There are companies out there who will happily take your money in exchange for what they call “do it yourself” kits that are all but worthless later on when they are needed. The best way to make a living trust is to do it through a reputable attorney. In fact, some states will not allow validity of any living trust that is not handled through a law professional.
You should also be aware of the fact that a poorly written living trust can actually cost your loved ones more money than they might want or be able to spend. It is very important that you take the time to have your living trust set up properly and that you transfer your assets into the trust as required. No one likes to think about their own demise, but no one wants to saddle those left behind with undue burdens either. This can be especially important if you have minor children who will need a guardian in case you are not around to take care of them.
Janita Copier
Sam Rosenna asked:
With so much economic doom and gloom surrounding us, it makes sense to batten down the hatches and protect your assets. If your assets are scattered about and are not protected, your liabilities could be laid wide open and your financial situation and personal security could be put at risk. However, an offshore trust can be used as an asset protection strategy to rid high net worth individuals of asset protection worries.
What is an offshore trust and what can it do for me?
An offshore trust is similar to an onshore trust – but it is held at an offshore financial centre and has the benefit of greater asset protection than onshore trusts.
An offshore trust is an arrangement entered into by a person or group – the “Trustee,” and a chosen person or group of people – the “Settlor,” by which provisions are made in a legal and binding for – the “Deed of Trust”. Offshore trusts hold the title to assets, funds and / or to property and manage these assets in accordance with the deed of trust to provide offshore trust benefits and distributions to a person or group – the “Beneficiaries” – of the trust funds. The trustee and / or the offshore trust company entrusted with the management of the trust are legally bound to uphold the written agreement, and they agree to the requirements set out by the deed of trust. Once set up, offshore trusts can be used to protect your assets and ensure your financial security now and in the future.
Some of the ways offshore trusts can protect your assets:
Offshore trusts are structured to take your every liability into account and protect you, your estate and any heirs from income, capital gains and estate and inheritance tax
Protection of real estate or large sums of money by removing your personal liability so no one can attack your assets through you in the event of, for example, a divorce, bankruptcy or unjustifiable legal action
Any properties held within an offshore trust are protected from the complicated probate process after death
Assets to be left to many family members can be structured within an offshore trust to ensure that these members receive an ongoing income from all familial assets
When you die, your assets will be kept private to protect your privacy and that of your descendants
Your exact wishes concerning assets or money willed to vulnerable people that you wish to care for after your death must be exactly according to your wishes ensuring that these assets are used appropriately
Avoidance of liquidation of any family business(es) upon the death of an important member of the company
Offshore trusts provide the trustee with great flexibility, control and authority over their assets and provide absolute confidentiality, total privacy and protection from liability. Assets managed by offshore trusts are mainly free from tax applicable in a settlor’s home country or jurisdiction, protecting assets for heirs. An offshore trust is effectively a shield of protection to protect assets from scrutiny, tax and civil legislation and provide peace of mind for people looking to protect their assets and provide for their descendants into the future.
Morton Pantone
With so much economic doom and gloom surrounding us, it makes sense to batten down the hatches and protect your assets. If your assets are scattered about and are not protected, your liabilities could be laid wide open and your financial situation and personal security could be put at risk. However, an offshore trust can be used as an asset protection strategy to rid high net worth individuals of asset protection worries.
What is an offshore trust and what can it do for me?
An offshore trust is similar to an onshore trust – but it is held at an offshore financial centre and has the benefit of greater asset protection than onshore trusts.
An offshore trust is an arrangement entered into by a person or group – the “Trustee,” and a chosen person or group of people – the “Settlor,” by which provisions are made in a legal and binding for – the “Deed of Trust”. Offshore trusts hold the title to assets, funds and / or to property and manage these assets in accordance with the deed of trust to provide offshore trust benefits and distributions to a person or group – the “Beneficiaries” – of the trust funds. The trustee and / or the offshore trust company entrusted with the management of the trust are legally bound to uphold the written agreement, and they agree to the requirements set out by the deed of trust. Once set up, offshore trusts can be used to protect your assets and ensure your financial security now and in the future.
Some of the ways offshore trusts can protect your assets:
Offshore trusts are structured to take your every liability into account and protect you, your estate and any heirs from income, capital gains and estate and inheritance tax
Protection of real estate or large sums of money by removing your personal liability so no one can attack your assets through you in the event of, for example, a divorce, bankruptcy or unjustifiable legal action
Any properties held within an offshore trust are protected from the complicated probate process after death
Assets to be left to many family members can be structured within an offshore trust to ensure that these members receive an ongoing income from all familial assets
When you die, your assets will be kept private to protect your privacy and that of your descendants
Your exact wishes concerning assets or money willed to vulnerable people that you wish to care for after your death must be exactly according to your wishes ensuring that these assets are used appropriately
Avoidance of liquidation of any family business(es) upon the death of an important member of the company
Offshore trusts provide the trustee with great flexibility, control and authority over their assets and provide absolute confidentiality, total privacy and protection from liability. Assets managed by offshore trusts are mainly free from tax applicable in a settlor’s home country or jurisdiction, protecting assets for heirs. An offshore trust is effectively a shield of protection to protect assets from scrutiny, tax and civil legislation and provide peace of mind for people looking to protect their assets and provide for their descendants into the future.
Morton Pantone
Rocco Beatrice asked:
Your Federal Government has mandated (as of June 30, 2006) that before you qualify for nursing home care, you must spend-down all of your assets. These restrictive new rules are designed to impoverish the healthy spouse. They have mandated a 5 year look-back, that means you better have done something to protect your assets 5 years before you become sick.
Without careful attention your accumulated wealth can disappear before your very eyes, because you were unlucky in your health. If either you or your spouse get sick, before you can ask for any government assistance, you must spend all of your accumulated wealth, leaving your healthy spouse without any resources to keep on living the lifestyle you and your spouse are normally accustomed to.
Good health, although very important and a blessing, cannot be relied upon as we all know no one can predict the future. But you can do something about this now to ensure that your wealth is limited to how much the government can expect from you.
There is a method to insulate your assets from the nursing home mandated spend-down. So what is this secret, you ask? Simple. It’s called an irrevocable trust.
So what is an irrevocable trust? An irrevocable trust can reposition your assets to allow you control and limit the amount that can be demanded Of the nursing home spend-down mandate to reduce your hard-earned wealth. Assets that qualify for repositioning are your primary residence, your vacation spot, your CD’s, your stocks, bonds, and other investments.
By “repositioning your assets” (transferring your assets) to an irrevocable trust you legally no longer own the assets, therefore no one can demand or sue you for those assets. Even more important, if you no longer own your assets you don’t qualify for the expensive probate process and you do not have to pay estate taxes.
Moreover, if you have a will, “your will” won’t protect your assets from the nursing home spend-down, it will not avoid probate and it will not avoid taxes on your estate. So, in essence, an irrevocable trust is ideal in many instances.
A solid, personally developed and well-planned irrevocable trust by a team of competent professionals such as accountants, lawyers and financial planners can avoid these more than mere unpleasant events. It can literally save you and your family’s fortunes and life-savings.
Stanley Duley
Your Federal Government has mandated (as of June 30, 2006) that before you qualify for nursing home care, you must spend-down all of your assets. These restrictive new rules are designed to impoverish the healthy spouse. They have mandated a 5 year look-back, that means you better have done something to protect your assets 5 years before you become sick.
Without careful attention your accumulated wealth can disappear before your very eyes, because you were unlucky in your health. If either you or your spouse get sick, before you can ask for any government assistance, you must spend all of your accumulated wealth, leaving your healthy spouse without any resources to keep on living the lifestyle you and your spouse are normally accustomed to.
Good health, although very important and a blessing, cannot be relied upon as we all know no one can predict the future. But you can do something about this now to ensure that your wealth is limited to how much the government can expect from you.
There is a method to insulate your assets from the nursing home mandated spend-down. So what is this secret, you ask? Simple. It’s called an irrevocable trust.
So what is an irrevocable trust? An irrevocable trust can reposition your assets to allow you control and limit the amount that can be demanded Of the nursing home spend-down mandate to reduce your hard-earned wealth. Assets that qualify for repositioning are your primary residence, your vacation spot, your CD’s, your stocks, bonds, and other investments.
By “repositioning your assets” (transferring your assets) to an irrevocable trust you legally no longer own the assets, therefore no one can demand or sue you for those assets. Even more important, if you no longer own your assets you don’t qualify for the expensive probate process and you do not have to pay estate taxes.
Moreover, if you have a will, “your will” won’t protect your assets from the nursing home spend-down, it will not avoid probate and it will not avoid taxes on your estate. So, in essence, an irrevocable trust is ideal in many instances.
A solid, personally developed and well-planned irrevocable trust by a team of competent professionals such as accountants, lawyers and financial planners can avoid these more than mere unpleasant events. It can literally save you and your family’s fortunes and life-savings.
Stanley Duley
Abbi Rouse asked:
Families in Britain “continue to borrow big and spend bigger” despite the fact that economic pressures have grown on them in recent times, new research has revealed.
London Stock Exchange-listed investment trust company Alliance Trust has revealed in its Research Centre report a number of what it calls “headline” factors that British families need to be aware of, especially if they are considering taking on extra debts such as a personal loan in the near future.
The report – which has been going for ten years with the latest quarter two analysis released today – reveals that real earnings growth has now reached its lowest level at any time in the decade that the report has been running, while spending has increased over the last year. The same can be said for levels of household debt, seen in personal loans and secured loans, as well as credit cards and overdrafts.
“Far from never having it so good, we’ve seldom had it so bad, with homes squeezed by lower earnings growth, higher mortgage repayments and chronic council taxes, to name just a handful of issues”, said Shona Dobbie, head of Alliance Trust Research Centre.
“But British families continue to borrow big and spend bigger which confirms this reality just isn’t hitting home. It’s only really thanks to recent economic growth and lower utility prices that we’ve seen even a mild improvement in the predicament facing households”.
The financial reality index shows that household pressures, such as mortgage payments or secured loans and council tax bills, are leading to households “being squeezed”. The household budget index section of the report witnessed a slight rise, suggesting things are marginally better than at the same time last year, but Alliance Trust points out that the index score is still the third lowest on record and is approximately three times lower than in 1998.
According to the net wealth section of the report, however, this factor rebounded into positive territory for the first time since the first quarter of 2006, with consumer debt being counteracted by increasing house prices and rising equities.
Despite the increase in net wealth, the financial reality index has climbed but a few index points and still lies “below the critical territory” of 100 index points. Having been in what is known as negative territory for three years, its current position on 82.0 reflects a near five-point climb, but household budgets continue to “weigh heavily on the index”, according to Alliance Trust.
Alliance Trust was established in 1888 and has its headquarters in Dundee as well as offices in Edinburgh, London and Hong Kong, according to the firm’s website. At the end of January, it was managing a total of 2.8 billion pounds of assets.
Last month, Alliance & Leicester suggested that borrowers should consider low-rate loans when making big purchases, rather than relying on credit cards or forecourt finance for such requirements. It said that although many borrowers have “good intentions”, they could be losing out by not shopping around for the cheapest personal loan.
Grover Spanski
Families in Britain “continue to borrow big and spend bigger” despite the fact that economic pressures have grown on them in recent times, new research has revealed.
London Stock Exchange-listed investment trust company Alliance Trust has revealed in its Research Centre report a number of what it calls “headline” factors that British families need to be aware of, especially if they are considering taking on extra debts such as a personal loan in the near future.
The report – which has been going for ten years with the latest quarter two analysis released today – reveals that real earnings growth has now reached its lowest level at any time in the decade that the report has been running, while spending has increased over the last year. The same can be said for levels of household debt, seen in personal loans and secured loans, as well as credit cards and overdrafts.
“Far from never having it so good, we’ve seldom had it so bad, with homes squeezed by lower earnings growth, higher mortgage repayments and chronic council taxes, to name just a handful of issues”, said Shona Dobbie, head of Alliance Trust Research Centre.
“But British families continue to borrow big and spend bigger which confirms this reality just isn’t hitting home. It’s only really thanks to recent economic growth and lower utility prices that we’ve seen even a mild improvement in the predicament facing households”.
The financial reality index shows that household pressures, such as mortgage payments or secured loans and council tax bills, are leading to households “being squeezed”. The household budget index section of the report witnessed a slight rise, suggesting things are marginally better than at the same time last year, but Alliance Trust points out that the index score is still the third lowest on record and is approximately three times lower than in 1998.
According to the net wealth section of the report, however, this factor rebounded into positive territory for the first time since the first quarter of 2006, with consumer debt being counteracted by increasing house prices and rising equities.
Despite the increase in net wealth, the financial reality index has climbed but a few index points and still lies “below the critical territory” of 100 index points. Having been in what is known as negative territory for three years, its current position on 82.0 reflects a near five-point climb, but household budgets continue to “weigh heavily on the index”, according to Alliance Trust.
Alliance Trust was established in 1888 and has its headquarters in Dundee as well as offices in Edinburgh, London and Hong Kong, according to the firm’s website. At the end of January, it was managing a total of 2.8 billion pounds of assets.
Last month, Alliance & Leicester suggested that borrowers should consider low-rate loans when making big purchases, rather than relying on credit cards or forecourt finance for such requirements. It said that although many borrowers have “good intentions”, they could be losing out by not shopping around for the cheapest personal loan.
Grover Spanski
The Secrets To Preparing A Last Will & Testament That Protects Your Family and Preserves Your Assets
Nicholas Giuditta asked:
You are a busy professional or business executive who must serve his clients or build his business. However, you also have a family and significant personal assets that require your attention. How can you find the time to both grow your business and ensure that your assets are not devoured by estate taxes upon your death? Selecting an experienced trust and estate planning attorney is critical.
Federal and State estate taxes can erode as much as 70 percent of your estate leaving your loved ones with significantly less money than you had anticipated. A credit shelter or tax savings trust, included in your Will and that of your spouse, can eliminate or reduce these devastating taxes. In order for a tax savings trust to work, assets owned by you and your spouse must be titled so that each owns approximately the same amount of assets in their own name. Upon the death of the first spouse, assets are transferred to the trust. The assets then pass tax free to your children upon the death of your spouse.
For some individuals, the use of an irrevocable life insurance trust is also a key component to reduce the bite of death taxes. This trust will become the owner of a life insurance contract and will receive the death benefit upon the death of the surviving spouse in a marriage. The proceeds from the policy will be excluded from the estate of the surviving spouse, thereby eliminating or reducing the estate tax to be paid. Furthermore, the remaining monies in the trust can then be distributed tax free to your children or other chosen beneficiaries.
In addition to preserving your financial estate, protecting your children in the event you and your spouse die before they are eighteen (18) is a fundamental goal of any successful estate plan. The Will should designate an individual known as a guardian who will assume parenting responsibilities. This person should share your child rearing philosophy and be mentally and physically able to perform this difficult and challenging task. Naming an elderly parent as guardian is not recommended. Many individuals will name a trusted brother or sister and their spouse. It is not a good idea to name a brother-in-law or sister-in-law to serve with your sibling as a co-guardian. Who is to say if that in-law will remain married to your sibling? You do not want an estranged in-law with a legal claim to raise your children.
Careful consideration should also be given to the choice of an executor for your estate. An executor should be a responsible and organized person. This individual could be a spouse, adult child or trusted professional. An executor will work with an attorney to probate the Will and to value the assets of the decedent as of the date of death. Thereafter, estate debts and taxes will be paid by the executor with the balance of the estate being distributed to the beneficiaries in accordance with the terms of his Will.
It is important to realize that without a properly prepared Will the State and Federal government will receive more of your estate than you may believe. Moreover, without a Will the beneficiaries of the estate you have worked a lifetime to accumulate will be decided by the State and not you. In many instances, these State mandated beneficiaries are not the same people you would have named in a Will.
In conclusion, a properly prepared Last Will and Testament with the appropriate tax savings trust and the proper selection of an executor and guardian will preserve your assets and provide the peace of mind you and your loved ones deserve.
Aletha Douet
You are a busy professional or business executive who must serve his clients or build his business. However, you also have a family and significant personal assets that require your attention. How can you find the time to both grow your business and ensure that your assets are not devoured by estate taxes upon your death? Selecting an experienced trust and estate planning attorney is critical.
Federal and State estate taxes can erode as much as 70 percent of your estate leaving your loved ones with significantly less money than you had anticipated. A credit shelter or tax savings trust, included in your Will and that of your spouse, can eliminate or reduce these devastating taxes. In order for a tax savings trust to work, assets owned by you and your spouse must be titled so that each owns approximately the same amount of assets in their own name. Upon the death of the first spouse, assets are transferred to the trust. The assets then pass tax free to your children upon the death of your spouse.
For some individuals, the use of an irrevocable life insurance trust is also a key component to reduce the bite of death taxes. This trust will become the owner of a life insurance contract and will receive the death benefit upon the death of the surviving spouse in a marriage. The proceeds from the policy will be excluded from the estate of the surviving spouse, thereby eliminating or reducing the estate tax to be paid. Furthermore, the remaining monies in the trust can then be distributed tax free to your children or other chosen beneficiaries.
In addition to preserving your financial estate, protecting your children in the event you and your spouse die before they are eighteen (18) is a fundamental goal of any successful estate plan. The Will should designate an individual known as a guardian who will assume parenting responsibilities. This person should share your child rearing philosophy and be mentally and physically able to perform this difficult and challenging task. Naming an elderly parent as guardian is not recommended. Many individuals will name a trusted brother or sister and their spouse. It is not a good idea to name a brother-in-law or sister-in-law to serve with your sibling as a co-guardian. Who is to say if that in-law will remain married to your sibling? You do not want an estranged in-law with a legal claim to raise your children.
Careful consideration should also be given to the choice of an executor for your estate. An executor should be a responsible and organized person. This individual could be a spouse, adult child or trusted professional. An executor will work with an attorney to probate the Will and to value the assets of the decedent as of the date of death. Thereafter, estate debts and taxes will be paid by the executor with the balance of the estate being distributed to the beneficiaries in accordance with the terms of his Will.
It is important to realize that without a properly prepared Will the State and Federal government will receive more of your estate than you may believe. Moreover, without a Will the beneficiaries of the estate you have worked a lifetime to accumulate will be decided by the State and not you. In many instances, these State mandated beneficiaries are not the same people you would have named in a Will.
In conclusion, a properly prepared Last Will and Testament with the appropriate tax savings trust and the proper selection of an executor and guardian will preserve your assets and provide the peace of mind you and your loved ones deserve.
Aletha Douet
Joseph Kenny asked:
Everybody wants to give their children the best possible start in life, and make their future as secure as possible. Two ways of helping them, money-wise, are by encouraging them to save with their own bank account, and by making investments on their behalf.
Children’s Accounts
Most high street banks offer children’s accounts, usually a straightforward bank account with a moderate interest rate. These often come with incentives like free piggy banks that are intended to help children develop a sense of responsibility and prudence about money from an early age. You may like to give your child a financial education by opening them their ‘own’ account – though there’s nothing to stop you using a normal adult account with better rates of interest.
National Savings
The Children’s Bonus Bonds are a tax-free savings account specifically aimed at children. You can invest between £25 and £3000 a year for five years and get guaranteed interest, plus a bonus. Many people choose to give Premium Bonds as gifts for children’s birthdays. If they win, it could give them the best present ever!
Child Trust Bonds
The government have introduced a special scheme to give children a savings account from the very beginning. Any child born after 1st September 2002 is entitled to a voucher worth £250 to be invested in a savings account. Visit www.childtrustfund.gov.uk for details.
It’s a good idea to invest for your children’s’ education as early as possible – whether that means private school fees or supporting them when they go into higher education. Long term investments, such as bonds with a ten year term, are a good choice for this purpose.
Children are taxed in the same way as adults, and have their own personal tax allowances. If you give money or assets to your own child and it produces an income of £100 or over, the income is counted as yours and taxed at your top rate. You can avoid this rule by choosing investments with tax free returns or capital gains, rather than income.
If people other than parents give gifts then the income counts as the child’s own, and in this case it’s a good idea to ask grandparents or relatives to send a letter or card with any money gifts. That way you have proof of whom the money came from in case the tax office demands it. For a detailed explanation of children’s tax issues, look up the Inland Revenue’s website at www.hmrc.gov.uk
Kirby Mcgivney
Everybody wants to give their children the best possible start in life, and make their future as secure as possible. Two ways of helping them, money-wise, are by encouraging them to save with their own bank account, and by making investments on their behalf.
Children’s Accounts
Most high street banks offer children’s accounts, usually a straightforward bank account with a moderate interest rate. These often come with incentives like free piggy banks that are intended to help children develop a sense of responsibility and prudence about money from an early age. You may like to give your child a financial education by opening them their ‘own’ account – though there’s nothing to stop you using a normal adult account with better rates of interest.
National Savings
The Children’s Bonus Bonds are a tax-free savings account specifically aimed at children. You can invest between £25 and £3000 a year for five years and get guaranteed interest, plus a bonus. Many people choose to give Premium Bonds as gifts for children’s birthdays. If they win, it could give them the best present ever!
Child Trust Bonds
The government have introduced a special scheme to give children a savings account from the very beginning. Any child born after 1st September 2002 is entitled to a voucher worth £250 to be invested in a savings account. Visit www.childtrustfund.gov.uk for details.
It’s a good idea to invest for your children’s’ education as early as possible – whether that means private school fees or supporting them when they go into higher education. Long term investments, such as bonds with a ten year term, are a good choice for this purpose.
Children are taxed in the same way as adults, and have their own personal tax allowances. If you give money or assets to your own child and it produces an income of £100 or over, the income is counted as yours and taxed at your top rate. You can avoid this rule by choosing investments with tax free returns or capital gains, rather than income.
If people other than parents give gifts then the income counts as the child’s own, and in this case it’s a good idea to ask grandparents or relatives to send a letter or card with any money gifts. That way you have proof of whom the money came from in case the tax office demands it. For a detailed explanation of children’s tax issues, look up the Inland Revenue’s website at www.hmrc.gov.uk
Kirby Mcgivney
Ramapati Singhania asked:
An asset protection trust is an arrangement for the holding and administration of property under which property or legal rights are vested by the owner of the property (the Settlor) in a person or persons (the Trustees).
* The Trustees then hold the property for or on behalf of other persons (the Beneficiaries).
* It is essential that the transfer is gratuitous otherwise the transaction takes on the characteristics of some other legal entity.
* A trust may therefore be defined as an equitable obligation which binds the trustees to hold and deal with the trust assets for the benefit of the beneficiaries in accordance with the terms of the trust.
* A trustee administers the asset trusts assets and distributes them to the beneficiaries in accordance with the terms of the trust deed and the proper law of the trust.
* The flexibility and protection afforded by trust arrangements are such that they have become an important part of long term wealth management.
Through the use of asset protection trusts it is often possible for family assets to be preserved over succeeding generations substantially free from:
* taxation,
* probate requirements,
* succession laws,
* expropriation and
* Foreign exchange controls.
There is no requirement in Mauritius to register trusts, thereby maintaining confidentiality. A corporate structure allows its shareholders to have business conducted, own assets and limit liability. The ability to manage assets through a combination of trusts and companies is proving increasingly valuable and the legislation in force in Mauritius provides an effective framework for the conduct of international fiduciary activities and providing services in that respect.
How is a asset protection trust created?
Trusts in Mauritius are governed by the Trusts Act, 2001.A asset protection trust can only be created by an instrument in writing which should state its Object, subject, intention and Duties and powers of the trustees.
* It can be formed by a resident or non-resident of Mauritius.
* There is no register of Trusts in Mauritius nor is there any disclosure of beneficial owner to any authority.
* Trust created by written documents will generally take two forms:
* Settlement:
This form of document will be entered into and signed by both the settler and the trustee and so provide clear evidence of the intentions of both parties and of the agreed obligations assumed by the trustee.
* Declaration of Trust:
This form of document is entered into and executed by the trustee only, and records that the trustee has received certain property, specified in the document, to hold upon the terms set out in the document. It is sometimes more convenient to create a asset protection trust by declaration of trust rather than by settlement, for example, the settler may not be available to sign the document, when it is prepared.
Types of Trust
Most offshore asset protection trusts fall into four broad categories:
1. Private: including discretionary, accumulation and maintenance, life interest and fixed interest trusts.
2. Corporate: including pension and employee benefit trusts.
3. Charitable: solely for the benefit of charitable organizations.
4. Purpose: trusts with no beneficiaries that are established for purposes that are certain, reasonable and certain.
Larisa Lofton
An asset protection trust is an arrangement for the holding and administration of property under which property or legal rights are vested by the owner of the property (the Settlor) in a person or persons (the Trustees).
* The Trustees then hold the property for or on behalf of other persons (the Beneficiaries).
* It is essential that the transfer is gratuitous otherwise the transaction takes on the characteristics of some other legal entity.
* A trust may therefore be defined as an equitable obligation which binds the trustees to hold and deal with the trust assets for the benefit of the beneficiaries in accordance with the terms of the trust.
* A trustee administers the asset trusts assets and distributes them to the beneficiaries in accordance with the terms of the trust deed and the proper law of the trust.
* The flexibility and protection afforded by trust arrangements are such that they have become an important part of long term wealth management.
Through the use of asset protection trusts it is often possible for family assets to be preserved over succeeding generations substantially free from:
* taxation,
* probate requirements,
* succession laws,
* expropriation and
* Foreign exchange controls.
There is no requirement in Mauritius to register trusts, thereby maintaining confidentiality. A corporate structure allows its shareholders to have business conducted, own assets and limit liability. The ability to manage assets through a combination of trusts and companies is proving increasingly valuable and the legislation in force in Mauritius provides an effective framework for the conduct of international fiduciary activities and providing services in that respect.
How is a asset protection trust created?
Trusts in Mauritius are governed by the Trusts Act, 2001.A asset protection trust can only be created by an instrument in writing which should state its Object, subject, intention and Duties and powers of the trustees.
* It can be formed by a resident or non-resident of Mauritius.
* There is no register of Trusts in Mauritius nor is there any disclosure of beneficial owner to any authority.
* Trust created by written documents will generally take two forms:
* Settlement:
This form of document will be entered into and signed by both the settler and the trustee and so provide clear evidence of the intentions of both parties and of the agreed obligations assumed by the trustee.
* Declaration of Trust:
This form of document is entered into and executed by the trustee only, and records that the trustee has received certain property, specified in the document, to hold upon the terms set out in the document. It is sometimes more convenient to create a asset protection trust by declaration of trust rather than by settlement, for example, the settler may not be available to sign the document, when it is prepared.
Types of Trust
Most offshore asset protection trusts fall into four broad categories:
1. Private: including discretionary, accumulation and maintenance, life interest and fixed interest trusts.
2. Corporate: including pension and employee benefit trusts.
3. Charitable: solely for the benefit of charitable organizations.
4. Purpose: trusts with no beneficiaries that are established for purposes that are certain, reasonable and certain.
Larisa Lofton