I want to set up a trust for my family so I can put money into it now for them to use later for things like deposits for first houses – even if I’ve died before they need the money. The plan is to put about £300,000 into it now then add more in during my retirement, provided I can afford to do so. Is a trust a good idea?

Lowestoft Journal: Matthew Beck, chartered financial planner with Smith & PinchingMatthew Beck, chartered financial planner with Smith & Pinching (Image: Archant)

Matthew Beck from Smith & Pinching responds:

Providing money at key points for the family is a frequent objective for clients but it is important to ensure that you have enough for your own needs before you give money away. You must remember that if you move money into a trust, control of the trust falls on the trustees you’ve appointed and the money can only be used for the purposes laid down in the trust document.

If I were to advise you on this, I would start by analysing the wider picture of your finances to establish the targets you want to achieve, including what you will likely need to enjoy your desired lifestyle in retirement. We’d need to look at your current and future income and expenditure and explore a number of different scenarios about your needs, such as the potential to pay care fees at some stage in the future.

A family trust may well be the solution that works for you, as it would ensure that the beneficiaries only access the money for the things that you want to support. Trusts can also be used to protect family assets from being swallowed up in a divorce settlement or bankruptcy proceedings. However, there are many variations of trusts and other estate planning measures: it’s not a “one size fits all” solution, so you may want to consider a number of estate planning tools to achieve your goals.

Trusts are a complex area: the trust is a legal entity in its own right and its income and gains may be subject to tax charges. There will be costs involved in setting up the trust – which is usually done with the help of a legal professional – and with its ongoing administration. Many trusts are required to submit an annual self-assessment tax return, for example.

Most UK trusts must be registered with HM Revenue & Customs. Incidentally, all qualifying trusts are required to be registered, whenever they were set up, so trustees of older trusts should check they’ve complied with the rules.

My recommendation to you is to take a step back from your wish to support your family and do some comprehensive financial planning. That way you can achieve that target in conjunction with targets for your own future security and comfort.

Any opinions expressed in this article do not constitute advice.

For more information, please visit www.smith-pinching.co.uk