What is a trust and do I need one?

A trust is a way of managing your money, investments, land or property. It is a legal arrangement where someone (the Settlor) puts assets into a trust and appoints people called trustees to manage them for the benefit of others (beneficiaries). Once assets are placed into a trust, the trustees control them and must manage them according to the rules set out in the trust deed or, in some cases, a Will.

Some of the most common trusts include:

• Bare Trust: Assets will belong outright to the beneficiary, but trustees manage them until the beneficiary reaches 18 years of age.
• Discretionary Trust: A class of beneficiaries are included. Trustees have discretion over who benefits and when, but would be guided by the Settlor’s wishes.
• Life Interest Trust: Someone benefits during their lifetime and others benefit later. Usually, the former will receive the income and upon their death the capital will go to ultimate beneficiaries.
• A Disabled Person’s Trust: certain criteria need to be met for this type of trust.

Do I need a trust?

Trusts are often used for one or more of the following reasons:

• Protecting assets for children or grandchildren, vulnerable or disabled beneficiaries or beneficiaries who may not be financially responsible.
• Controlling when and how your assets are inherited. It can delay when beneficiaries receive assets, allows trustees to release funds gradually or you can set conditions around how funds are used.
• Estate and tax planning. Some trusts can be used as part of Inheritance Tax planning, helping to reduce the value of your estate over time or manage how tax is paid. However, trusts have their own tax rules, which can be complex, so specialist advice is essential.
• Providing for family members while protecting capital. Trusts are often used in Wills to provide income or a home for a surviving spouse or partner which preserves the capital for children. This is common in blended families to preserve the capital for children from previous relationships.

Trusts can be extremely effective but need to be set up carefully to ensure they achieve the intended outcome. Poorly drafted trusts can cause confusion, delay and unexpected tax consequences.

If you are considering setting up a trust or would like to review your existing arrangements, professional advice can help ensure your estate planning works exactly as you intend.

Book your appointment today by contacting one of our offices:

• Saffron Walden: 01799 523 441
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