How trusts can help blended families plan and pass on their wealth

On behalf of Attwaters Jameson Hill posted in Trusts & Probate on Thursday, June 20th, 2019

Families brought together by new relationships can face a range of unique stresses and strains when it comes to dealing with their wealth. If, for instance, a parent has children with more than one partner, then the difficulties of managing their finances can multiply, sometimes giving rise to relationship difficulties within the blended family. Even if a parent manages to navigate the complexities of being financially even-handed during their lifetime, there could still be family tensions after their death.

Trusts can play an important part in helping to fulfil a parent’s wishes by directing funds to their chosen beneficiaries, and can also safeguard family businesses and ringfence funds for important provisions such as care costs later in life.

 

Trusts in action

To illustrate how trusts can help families deal with the challenges they face in managing their wealth for the future, we’ve imagined a scenario where a family, headed up by Mr and Mrs Smith, want to make provision for their family on their deaths. Mr Smith has run a successful family manufacturing business for many years, and he’s keen to make succession plans that safeguard its future. He and his wife have also built up a substantial investment portfolio, and own a couple of residential properties in addition to their main home.

Mrs Smith has a daughter from a previous marriage who unfortunately Mr Smith has never really got on with. Mr and Mrs Smith had a son together, and they would really like to pass the family business on to him, as he’s been involved with it all his life. Sadly, the son’s marriage is in difficulties, and Mr Smith has concerns that if it doesn’t last, then the business or a part of it could end up being owned outside the family if the couple were to divorce. In addition, the son has a gambling problem that Mr Smith worries may become out of control.

There are several ways in which trusts can help this family fulfil its goals. The business could be left in trust to safeguard its future, helping to protect it from forming part of the son’s marital assets if he and his wife were to divorce, and shielding it from any creditors if the son were to run up gambling debts.

Mrs Smith is concerned that if she were to die before Mr Smith, her daughter wouldn’t be provided for on his death. Naturally she wants to make provision for her daughter, and this Mrs Smith can do by creating a trust in her favour in her Will.

 

Preserving wealth

Every family’s needs are different, and our advice will be tailored to help them fulfil their specific wealth goals. As well as dealing with scenarios such as the one above, families come to us for advice and guidance on a range of issues such as how to plan for care costs in later life, or how to provide for a disabled son or daughter in a way that preserves their entitlement to means-tested benefits, or ways of ensuring that funds are left for their grandchildren.

Trusts can play a valuable role in family wealth planning, they provide protection for assets, assist in inheritance tax planning and provide people with a means of controlling how their assets are used after they have been given away. If you’d like to discuss how trusts could help you and your family, then do get in touch.

 

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