Latest news with #trusts
Forbes
a day ago
- Business
- Forbes
The Parts Of Long-Term Financial Planning That Everyone Should Know
Confident young Asian woman with smartphone looking out through window while sitting in a cafe ... More having coffee. Making a personal financial plans and investment decisions. Wealth management. Business, banking, finance and investment concept Mapping out your finances for the long haul can help you grow wealth, build a reliable safety net, and weather life's twists and turns. As financial markets become more volatile and retirement planning seems increasingly out of reach, especially for millennials, it's imperative to start as early as possible, securing your financial future. Whether it's not having the right amount of insurance in place, neglecting to contribute to the correct retirement accounts, or not ensuring a seamless estate plan, many people have holes in their long-term financial planning. Learn about six key components you can include in your plan and how each one can strengthen your financial well-being. A will is a legally binding document that outlines how your property should be divided and how personal matters should be managed after your death. It can also designate guardians for your minor children and include instructions for end-of-life preferences. In contrast, a trust is a legal structure in which you, as the grantor, assign a trustee to oversee and manage assets for the benefit of specific individuals or organizations, known as beneficiaries. Both wills and trusts are critical estate planning tools that can help ensure your wishes are carried out and your loved ones are provided for. Having a will allows you to direct assets to the right people and name an executor to settle your estate. A trust offers extra benefits: It can bypass the probate process, saving time and preserving privacy for your heirs, and it can even include provisions for managing your assets if you become incapacitated—something a will cannot do. A taxable brokerage account is a regular investment account that you can open through a brokerage firm using money that's already been taxed. It gives you the flexibility to trade various assets, such as bonds, stocks, mutual funds, and ETFs, without the benefit of tax deferral or shelter. Unlike retirement accounts, a taxable account does not provide upfront tax deductions or tax-deferred growth. Instead, you pay taxes each year on any interest, dividends or capital gains earned in the account. A 401(k) plan is a company-sponsored retirement account that employees can contribute a percentage of their income toward for long-term savings. It can help automate saving, provide tax-deferred growth, and significantly boost your savings through employer matches. 'Given that just 11% of workers in private industry receive a pension, 401(k)s are a key pillar in building a secure retirement,' writes finance journalist Adam Shell. 'In fact, these tax-advantaged accounts remain the backbone of most people's retirement saving strategy.' Over decades, consistent 401(k) contributions can grow into a substantial fund to support you in retirement. IRAs come in two main types: traditional and Roth IRAs. Traditional IRAs allow you to make tax-deductible contributions in the year they're made, lowering your taxable income at that time. However, in retirement, the withdrawals you take are taxed as ordinary income. Roth IRAs, on the other hand, are funded with after-tax dollars and offer no immediate tax break, but qualified withdrawals in retirement are completely tax-free. By consistently contributing the maximum you can and investing prudently, an IRA can grow into a sizable component of your retirement nest egg. Term life insurance is the simplest, most straightforward type of life insurance. You purchase coverage for a specified term, such as 10, 20 or 30 years. If you (the insured person) die during that term, the policy pays out a tax-free lump sum death benefit to your chosen beneficiaries. If you outlive the term, the coverage ends, or you may have an option to renew at a higher rate. Term life insurance is fundamental for anyone who has others depending on their income or care. If you have young children, a spouse or aging parents who rely on you, life insurance ensures they are not left financially stranded. Indexed universal life (IUL) insurance is a form of lifelong coverage that combines a guaranteed death benefit with a cash value element that can grow over time. Unlike term life policies, IUL stays in force as long as you continue to make premium payments. It also includes a savings component that accumulates value, often tied to the performance of a market index, offering the potential for wealth building or protection. Rob Graham, CEO of Wealth Express, a platform that provides connection to IUL advisors, describes the advantage of an IUL as not just the protection of a death benefit, but also a wealth tool for during one's lifetime. As Graham observes, 'An IUL can accumulate wealth for an individual 'tax-free.' That wealth can then be accessed throughout one's lifetime for any reason, at any time, with no early withdrawal penalties (after the first year), 'tax-free' through loans that do not have to be paid back.' In practical terms, this means that as your IUL policy's cash value grows, you can borrow against it and use that money—for college tuition, a business investment, retirement income, or any purpose—without triggering taxes because loans from life insurance are not considered taxable income. Despite their potential benefits, IULs have often attracted criticism as a result of poorly set up policies. This underscores the importance of choosing the right financial advisor to help establish a strategy for an IUL. Graham notes, 'Many ill-informed agents max out the insurance and minimize the cash value component of the contract. This is bad for the consumer, and usually the consumer learns about it too late to do anything about it.' To truly realize the 'personal banking' advantages of an IUL, the policy should be designed with a relatively lower death benefit and higher contributions going into cash value, within allowed limits. While annuities are often one of the more misunderstood retirement strategies, the right product can provide a predictable income stream in retirement without exposure to volatility in the stock market. 'Recessions can be damaging to the economy and the stock market; they don't have to be damaging to your retirement lifestyle,' says Ty Young, CEO of Ty J. Young Wealth Management. 'The proper annuity, used correctly, can be the difference between a recession ruining your retirement and living the retirement lifestyle you've always dreamed of.' When you buy an annuity plan, it will pay you a guaranteed, specified sum of income upon reaching a certain date. Long-term financial wealth and security is built through incremental steps over a long period of time. Starting with the right infrastructure, such as robust estate planning, asset protection, and tax strategy is crucial. Then it becomes a process of remaining consistent in your investing and allowing compound interest enough time to accumulate.
Yahoo
3 days ago
- Politics
- Yahoo
Call for supporters' trusts to be recognised by law
A football supporters' trust leading a drive for fans to "play a meaningful part in decision making at their clubs" has been backed by a national campaign group. Fair Game has joined a coalition of 22 fan groups, led by Northampton Town Supporters Trust who are calling on the government to ensure "the unique status of trusts to be recognised and enshrined in law" as part of its Trusts First campaign. Niall Couper, chief executive of Fair Game, said the campaign was "about giving those communities a real voice in the game they love" The Department of Culture, Media and Sport has been approached for comment. The coalition of clubs, from all levels of the English game, intends to lobby government to "guarantee primacy for Trusts and other democratically-constituted supporter groups" in the forthcoming Football Governance Bill. The legislation, which is passing through parliament after being reintroduced by the Labour government in October, will hand power to a body independent from government and football authorities to oversee clubs in England's top five divisions. The Trusts First group includes supporters' trusts from Barnsley, Birmingham City, Blackburn Rovers, Bradford City, Doncaster Rovers, Exeter City, Fulham, Leicester City, Leyton Orient, Manchester United, Morecambe, Northampton Town, Plymouth Argyle, Reading, Scunthorpe United, Southend United, Swansea City, Swindon Town, Torquay United and Wolverhampton Wanderers. Mr Couper said: "It's time to ensure that meaningful fan engagement isn't just a slogan, but a reality." Andy Roberts, the chair of the Northampton Town Supporters' Trust, said: "The trust movement was founded in 1992, the year the Premier League was introduced, yet many fans up and down the country continue to be disenfranchised and marginalised by club owners pursuing their own vested interests. "We now have a clear opportunity to get all mandated supporter groups front and centre of fan engagement, not just those who are cherry picked by clubs to sit on their panels and boards. "We feel this should form part of the legislation and not be left to the discretion of the Independent Football Regulator." Fair Game said a meeting will be held with democratically-elected supporter groups next week to hear their concerns for the future of football first hand. Follow Northamptonshire news on BBC Sounds, Facebook, Instagram and X. Government's football regulator chair choice faces inquiry NTFC Supporters' Trust Fair Game
Daily Mail
07-06-2025
- Business
- Daily Mail
Can we gift our daughter three of the bedrooms in our house to lower inheritance tax bill?
Inheritance tax is a minefield for us. We do not want to leave our daughter with a big tax bill after we die, but our house may be worth £1million in 20 years. We have been advised to make a trust under Section 102. We've also been told to give our daughter three of our bedrooms, then if the last person survives seven years the house will not be included in IHT. This is because it will already be registered with the Government, and she will only have to deal with probate on the remaining funds. The cost would be north of £5,000. I'm not clued up about this, so can this be set up so that the last person to die be after seven years? For example, I could die tomorrow but my wife could live over seven years. Any advice welcome. Angharad Carrick of This Is Money says: Inheritance tax (IHT) is a thorny issue and I understand why you and your wife do not want to leave your daughter with a huge tax bill. Frozen thresholds combined with rising asset prices, including the value of homes, investments and savings, are already dragging more people into the IHT net. IHT is levied at 40 per cent on estates above a certain size. As an individual, your estate needs to be worth more than £325,000 for your loved ones to have to pay IHT. This can be doubled to £650,000, jointly, for married couples or civil partners, who have not already used up any of their individual allowances. A further crucial allowance, the residence nil rate band, increases the threshold by £175,000 each for those who leave their home to direct descendants. This gives a total potential extra boost of £350,000 and creates a potential maximum joint inheritance tax-free total of £1million. Changes to the rules in 2027 will also bring pension pots into people's estates, which will only add to the numbers due to pay death duties. This Is Money recently revealed how this change will add thousands to some families' tax bill. There are several ways to mitigate the tax's impact, but the rules are complex. We asked some tax experts for some general thoughts on using a trust for IHT and whether it's possible to gift your daughter part of your property. What is a trust for IHT purposes? Natalie Butt, Director, Private Clients at Crowe, says: A trust is a mechanism whereby an individual can move assets out of their estate. To get relief from IHT, an individual would need to a) give the asset away and retain no benefit, and b) survive 7 years from the gift. When an individual gifts any asset into a Trust, this is a lifetime chargeable transfer and is subject to an immediate charge to IHT – on the basis that the individual has not settled Trusts in the preceding 7 years, they would have the first £325,000 at 0 per cent and the balance above at 20 per cent. Generally, if the settlor survives for 7 years after making a gift to a Trust and has no benefit, it will fall outside of their estate. Trusts come with both legal and taxation reporting requirements, including registration on the Trust registration service, which is managed by HMRC. Trusts are often irrevocable and should not be entered into without due care and attention. For IHT purposes, when a married couple, or couple in a civil partnership, put assets jointly into a Trust, they are deemed to have both made the gift on the percentage of what they bring to the table. For example, if a rental property was owned tenants in common with a 60/40 split, then the total value would be apportioned. If one of the couple were to die within the 7 years, then their gift will fall back into their estate. Can I gift bedrooms to lower the tax bill? Rachael Griffin, tax and financial planning expert at Quilter says: At the heart of this is a concept known as the 'seven-year rule'. If you give something away like a share in your property, and survive for seven years, then that gift is generally outside your estate for IHT purposes. But there's a key catch you can't still benefit from what you've given away. This is known as a 'gift with reservation of benefit' (GWR), and it means if you keep living in the house rent-free after giving it away, HMRC will treat it as still being part of your estate, and tax it accordingly. That's where Section 102 of the Finance Act 1986 comes in. It outlines the GWR rules and is designed to stop people dodging IHT while continuing to enjoy the benefit of the gifted asset. Simply giving your daughter three bedrooms, while you and your wife carry on living in the house, would fall foul of these rules even if one of you survives another seven years. Some people try to mitigate this by paying market rent to the person they've gifted the house to but that's often impractical, especially when the beneficiary is a close family member like a child. HMRC expects it to be properly documented and paid consistently. Butt says: It is very difficult to give away your family home and continue to live there. One option an individual may consider to help ease the impact of IHT is to take out a life assurance insure the tax. This policy could be written into Trust and be accessible straight away on death. It should be outside the scope of IHT and enable the beneficiaries to pay the tax. If that is not an option due to age, some individuals are considering lifetime mortgages and using the cash borrowed against the property to gift to children. The alternative is for the parents to pay market rate rent to their children for the gift to be IHT effective. This technique though depletes cash savings and means the children have a reporting obligation to HMRC for the rent received and creates an income tax charge for them, so this is probably seen as a last resort. It would be advisable for individuals considering their options to seek professional advice. Please note, we cannot give tax advice in isolation – we need to know the full picture of any clients' needs. However, we can provide general pointers that should not be relied on. Is there anything I can do to lower the IHT bill? Griffin says: The good news is that if your daughter is your direct descendant and the house is your main residence, then each of you currently has a £175,000 residence nil-rate band in addition to your £325,000 standard nil-rate band. That means, as a couple, you could potentially pass on £1million tax-free — as long as your estate meets the criteria and doesn't breach the £2million taper threshold. If those allowances remain in place and your only significant asset is your home, your daughter might not face an IHT bill at all. But of course, tax rules can and do change. It's also important to consider your own financial needs. Gifting away your home or locking it into a trust could limit your options later in life, particularly if you need to fund care or downsize. Probate may still be required, even if IHT isn't due, and it can come with administrative and legal costs. Getting clear advice from a financial planner or solicitor with estate planning expertise is a wise next step. In short, be cautious about complex gifting arrangements, especially if you're still living in the property.
Wall Street Journal
19-05-2025
- Business
- Wall Street Journal
Howard Lutnick Sheds Ownership Stakes in Cantor Fitzgerald, BGC, Newmark
Commerce Secretary Howard Lutnick reached deals to sell or transfer away his ownership interests in multiple affiliated companies as part of a government ethics agreement. The financial services firm Cantor Fitzgerald said Monday that Lutnick, its former chairman and chief executive, has agreed to transfer his ownership to trusts benefiting his sons Brandon Lutnick and Kyle Lutnick, as well as Lutnick's other adult children.
Telegraph
15-05-2025
- Business
- Telegraph
Family hit with £176k inheritance tax bill for making common mistake
A grieving family has been hit with a £176,000 inheritance tax bill after their deceased relative fell foul of 'gifting' rules. Mohammed Chugtai gave away a property and a shop to a trust which was structured so that he could not benefit from the assets, meaning they should have been shielded from death duties when he died in 2017. However, following the gift to the trust, Mr Chugtai returned to live in the home to care for his adult daughter whose mental health issues meant she could not leave the house. Assets transferred as gifts are not excluded from the inheritance tax calculation if the person giving the gift is deemed to have subsequently benefitted from it. Tax experts warned the 'gift with reservation of benefit' rule often catches out families where parents give their home to their children, but continue to live in it until they die. At a first-tier tribunal hearing, Afsha Chugtai, another of Mr Chugtai's daughters and the executor of her father's will, insisted that Mr Chugtai had made these decisions seven years before he died, so the value of the trust should not have been included in his estate for inheritance tax purposes. She also claimed that her father had no choice but to return to the property given his daughter's condition. But HM Revenue & Customs (HMRC) successfully argued Mr Chugtai had benefitted from the property. Cleo Lunt, HMRC's solicitor, cited a previous high-profile inheritance tax case in which the judge said: 'Not only may you not have your cake and eat it, but if you eat more than a few de minimis crumbs of what was given, you are deemed for tax purposes to have eaten the lot.' Inheritance tax is usually paid at a rate of 40pc on an estate above the nil-rate band of £325,000, which rises to £500,000 if you are passing down a primary residence to a direct relative. But the 'seven-year rule' allows a person to pass down money or assets tax-free or at a reduced rate up to seven years before death. Placing an asset in a trust means you no longer own it, meaning it can be passed down tax-free after seven years if gifting rules are met. The total value of Mr Chugtai's estate was £843,950, comprising a £380,000 property with an attached shop, £62,239 in a Santander trust account, along with £401,711 of assets. Accountancy firm, Moore Kingston Smith, said that given the size of the estate, the Chugtai family's inheritance tax bill was likely to have been £176,896. Claire Roberts, a tax partner at Moore Kingston Smith, said: 'The 'gift with reservation of benefit' rules are typically widely misunderstood and often catch people out. 'This case highlights the fact that regardless of motive and the terms of a trust deed, retaining any benefit whatsoever in an asset given away will cause the gift to fail for inheritance tax purposes. 'This is something of a cautionary tale to those who may be considering gifting in their lifetime – get it wrong and your loved ones could be landed with a costly tax bill on your death.'
