Can I Set up Another Trust?
I have just dissolved a trust and have been told I will now have to pay Inheritance Tax. It was obviously a mistake to dissolve the trust in view of this.
Can I set up another trust or will the same thing apply?
Individuals choose to form a trust for a variety of reasons. Many ‘high worth’ individuals wish to find a tax efficient method of giving money to charity, while others are concerned about the safety of their assets in the event of an attempt by creditors to recoup their money. However, potentially the most common reason for establishing a Trust is the mitigation of an Inheritance Tax (IHT) liability. Forming a trust can be a highly efficient method of reducing an Inheritance Tax bill.
In short, the answer to your question is that you are free to set up as many trusts as you wish. There are no legal limits on the number of trusts that you can establish, although most people only have one trust running at a time if the purpose is the reduction of an IHT liability. As such, you are perfectly able to set up another trust, even having dissolved the first.
There are, however, a number of considerations that you should address. In the first instance, you mentioned that you would now have to pay Inheritance Tax. This is not the case; without a trust, the beneficiaries of your will would be liable for IHT, rather than you personally. However, a well formed trust can remove or mitigate this burden.
Similarly, you should consider why you chose to dissolve the trust in the first place. Sometimes, individuals establish trusts and then find that they do not have the freedom that they require in terms of dealing with their assets on a day-to-day basis. If this was the case for you, then you should consider what type of trust you are establishing.
There are a number of different kinds of IHT trust, and many offer considerable freedom to the settler (that is, the individual establishing the trust), allowing them to dispose of their assets during their lifetime as they see fit. You should give careful consideration to the terms of the trust, and ensure that it offers the maximum possible Inheritance Tax protection, while also ensuring that you can get to your assets if and when you need them.