My background: I am a British citizen, currently living in mainland Europe i.e. Austria. Off-late, I married an Austrian Citizen. We purchased a property together in Austria. There is no Prenup arrangement in place – The Austrian Notars and Lawyers advised that this exercise would be futile as should a divorce occur, the decision rests entirely with the Judge.
My family background: My parents have a few Assets i.e. Liquid (Capital) and Physical under their belt. My parents have a pension/Health insurance in place and sufficient Capital to survive should any illness overcome them. My parents (living in the UK) are a decade away from official retirement age.
Background on Query:
- I am reluctant to accept any assets from my parents as gifts as a I perceive these as a risk in the event of a divorce. We have spoken to a lawyer and an external financial advisor who advised us on setting up a “Trust” and nominating a “Trustee”. Said lawyer and financial advisor also mentioned that total fees payable would be minuscule as compared to inheritance taxes.
- My parents agreed that their assets remain within the family and get inherited by children, grandchildren, etc. So, in theory we intend for all assets to form part of the trust – Liquid assets (Capital) or any income derived from Physical assets would form part of the Trust.
- I understand that any capital withdrawal from said pot/ Trust, would be taxable.Is this correct?
- At some point, I intend to include my assets gained over the next few years as part of the Trust. In the event of divorce from my wife, would she be entitled to a part of the inheritance included in Trust from my parents?
This brings me to my query:
- Do Trusts work – Is the information mentioned in above section correct? Is my understanding correct?
- Are there any flaws/ risks involved in Trusts? What would happen in the instance the “Trustee” goes under administration/ declares bankruptcy? Is the Trustee a “Law firm” or can we nominate multiple individuals within our family as ”Trustee”?
- When my parents fall sick/ require old-age care / Medical care and should the capital be exhausted, what would happen at this point? Obviously, I am there to support my parents, but should I not be around i.e. dead, disabled, etc., what would happen in such an instance to the Trust? Would the trust be taken over by the Government?
- In the event of divorce from my wife, what would happen with the Trust?
- Is there a better option other than Trust, which is exempt from being divided in the event of a divorce?
I personally do not believe that you can get away scot-free without paying inheritance or any form of tax!
Thank you for your time and effort.