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Tax planning and the role of trusts

Trusts can have inheritance tax benefits, but there are many snags
September 30, 2020

Trust funds were once seen as a way for rich people to pass on money without paying tax, but the situation now looks much different. While they did previously have attractive tax advantages, a number of rules have been introduced over the past couple of decades that make the tax treatment of trusts less attractive than it once was. That said, they can still be of use.

While trusts can be tax-efficient in some circumstances, they are typically used as a way for an individual to pass on assets while retaining control over them, rather than for tax purposes, says Julia Rosenbloom, partner, private client tax services at Smith & Williamson.

Most trusts are used as a vehicle to pass on wealth to children and grandchildren. The trustees retain control over where the assets are invested and how much is paid out of the trust, but they will only have the option to pay out to designated beneficiaries. 

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