A Trust is a way for a person (Settlor) to formally transfer assets, whether it be property, shares or cash to a number of people (Trustees) to hold for the benefit of others (Beneficiaries).
Trusts need to be tailored to ensure they achieve what is intended by the Settlor in the most tax efficient way. Our expert team are on hand to advise you. Contact Jonathan Schoop now.
You can make a Trust in your lifetime by a Trust Deed or on death within your Will. The Deed or Will documents who the Trustees are and details the duties and conditions on which they are to deal with the trust assets (Trust Fund). The Trust will also state who the Beneficiaries are and what if any conditions are to be met before the beneficiaries are entitled to received income or capital from the Trust Fund.
The Trust Deed or Will, will also state how long the Trust will last.
There are many reasons why people make Trusts including:
- Asset protection. Trusts are commonly used for care fee planning and or to ensure that the correct people benefit from an asset. For example life interest trusts may be used where one spouse is already in a care home or there is a possibility of moving into a care home. The trust can be incorporated in the other spouses Will so that if the non-resident spouse dies first, the surviving resident will be provided for but the capital in the trust will not be added to the residents estate for means tested benefits. Discretionary trusts may be used in these circumstances to provide greater flexibility and also where there are children from a previous marriage to ensure that those children will not be excluded from the surviving spouses Will.
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- Protection of vulnerable beneficiaries. You may feel that certain beneficiaries of your estate require a third party such as a Trustee to look after their inheritance until they reach a suitable age or to manage their money to protect against spendthrifts and against dangers such as Bankruptcy and Divorce.
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- Taxation. The use of Trusts can give rise to significant savings of inheritance tax, particularly in the context of larger estates (Pilot Trusts) and for Pension Funds (By Pass Trusts).
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Type of Trust
There are many forms of trusts which can usually be adapted to meet the needs of the people involved. Two major types are Interest Possession Trusts otherwise known as Life Interest Trusts and the very flexible Discretionary Trusts both of which are mentioned above but can also be used in and for other circumstances.