Bloodline planning ensures that your assets reach your children, grandchildren, and other relatives intact, regardless of marital situations or divorce. Without proper bloodline planning, assets can be considered part of a beneficiary’s estate and are therefore at risk of being lost in divorce settlements, to creditors, or even just through taxation.
Protection Offered by Discretionary Trusts
The primary consideration of a trust is to protect assets and ensure that the trust fulfils the intentions of the settlor and needs of the beneficiaries. To see how a trust can do this, please see the case studies below.
Bloodline Trusts and Divorce
Divorce is an unfortunate reality for many families in the UK, so consider the protection a trust could offer in these common scenarios and ensure the assets are protected for your bloodline:
Michael and Lara have a daughter, Michelle. Michelle marries Carl – Carl starts a business but it struggles for several years, especially since Carl is poor with money management in general. Michael and Lara die, leaving their estate to their only daughter Michelle. Shortly afterwards, Carl’s business fails and Michelle and Carl begin divorce proceedings. Michelle’s assets are all declared as part of the divorce process so Carl receives half of Michelle’s inheritance, forcing her to sell her childhood home as well as parting with a number of other assets included in the will. Carl covers his substantial debts with the inheritance and eventually remarries; the assets Michael and Lara worked hard to accumulate then go to Carl’s children with his new wife.
In contrast, if Michael and Lara set up a trust, the trustee could remove Michelle during the divorce proceedings. When the divorce is absolute, she would be reinstated and Carl would be unable to access any of the assets in the trust.
Ultimately, a child’s choice of spouse can have a huge impact on family assets and how comfortably future generations can live. If you would like to protect your child’s inheritance, regardless of their relationship status, establishing a trust is a key consideration.
Benefits of a Discretionary Trust
Trusts exist to keep money in the family. As such:
- Trust assets can protected for your descendants, which means that they protect in cases of infidelity as well as divorce and bankruptcy
- A great way not only to save inheritance tax but income tax also
- Your child can still be given control over the trust
Appointing a professional trustee to manage your trust offers an additional level of protection, impartiality and a higher duty of care. Get in touch to find out more about how to set up a Discretionary Trust and protect your family’s assets.