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Advice

An expert lesson in educational trusts

Monika Volsing Monika Volsing
2 min read
This blog is more than 6 years old

Whilst you may want to give your children and grandchildren the opportunities available through private education and university, it is an expensive choice yet considered to be a priority by many people. Parents and grandparents are setting up trusts as a way to set aside money for the education of their children and grandchildren.

A word to the wise when setting up an educational trust

With the correct legal advice your educational trust will be set up correctly. You will have chosen your trustees wisely and considered the unforeseen tax consequences.

It is vital that you ensure the money cannot be diverted on your death and is used for the benefit of your children or grandchildren’s education.

Trusts can also have unforeseen tax consequences if not considered correctly. It is quite common for parents or grandparents to transfer investment properties into trusts for their children and grandchildren and create a form of trust, known as a ‘discretionary trust’. However, the transfer of property amounts to a disposal at market value for capital gains tax (CGT) purposes and could potentially result in you having to pay CGT where the property has gone up in value.

Complex lessons to follow about capital gains tax

Although a CGT relief, known as holdover relief, may be available, the relief is subject to certain conditions and exceptions. Furthermore, transferring assets into a trust during your life can result in you having to pay lifetime inheritance tax, if it causes you to go above the inheritance nil rate band taking into account previous gifts made. It should also be noted that as a result of anti-avoidance legislation the income from the trust property can continue to be regarded as income of the parents for income tax purposes.

Educational trusts continue to be a good way of providing for the educational needs of your children and grandchildren; therefore it is wise to obtain expert trust advice when you wish to set up a trust.

Please talk to our specialist solicitor Monika Volsing to discuss setting up an educational trust on 0113 320 5000 or email mkv@winstonsolicitors.co.uk

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