While many people think trusts are only for the very rich, this could not be further from the truth. Trusts have many uses with different types suitable for different situations. This can range from the most common use of trusts which is financial planning for your family to much more specific situations like the protection of money received from a personal injury case. At Mitchells Roberton we have a number of solicitors who specialise in the setting up and administration of trusts.
What exactly is a trust?
Trusts are a vehicle for holding assets for the benefit of someone. These assets could be money but may also include properties and investments. The key aspect of a trust is the appointment of trustees who become legally responsible for the holding and distribution of assets in accordance with the deed drafted by whoever is originally placing the assets in trust. The persons for whom the assets are held are called beneficiaries. Beneficiaries can be a specific person or they can be a group or a class of people.
Family trusts tend to be in one of two forms, these are:
- Discretionary Trusts – This is when the trustees have discretion as to how the assets in the trust are distributed to beneficiaries (subject to provisions in the deed of trust).
- Liferent Trusts – This type of trust allows a nominated person (often a spouse or civil partner) to use an asset (i.e. live in a house) or benefit from the income of an asset without owning the asset outright. The asset will then ultimately pass to a different person or group of persons – often the children of whoever wrote the trust.
Other forms of trust include:
- Charitable Trusts – These are an effective way of providing valuable financial assistance to particular people or organisations in need. This can include provisions for grants to be awarded by trustees to those who meet criteria set out in a deed or on a more discretionary basis.
- Personal Injury Trusts – If you have been successful in a personal injury claim, you will often receive the compensation in a large lump sum. This can cause problems if you or close family members require to claim for means tested benefits. This type of trust ring fences the compensation to ensure that it can be used for its required purpose.
- Disabled Beneficiary Trusts – these can be used to protect the assets of those with a disability or lack capacity.
What are the benefits of setting up a trust?
- Reduce Inheritance Tax – By placing assets in trust you reduce the value of your estate making it less likely to be stung by a large IHT cost.
- Protect assets from care home fees – This cannot be the sole reason for creating a trust but if done properly a trust can stop your home being sold off to pay for onerous care home fees.
- Provide for family in the future – You may want to transfer money or assets to a child or relative but on the provision that it is used sensibly and not frittered away. Alternatively you may just want it to be held in trust until they reach a certain age at which point it is fully transferred to them.
- Protection against business failure – Assets placed in trust can be exempt from creditors if a business venture fails.
If you think a trust could benefit you or your family, please contact one of our solicitors who will be happy to arrange a meeting to discuss what options are available and best suited to your needs.
Have more questions about Wills, Trusts & Estates? Go back to the Wills, Trusts & Estates page for help from our expert team.
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