A trust is a legal arrangement in which your assets (e.g. property, cash, shares or specific items), are held by nominated persons (the trustees), for the benefit of another person or a group of people (the beneficiaries).
The trustees have control over those assets until the appropriate time for them to be paid out or transferred to the beneficiaries.
The creation of a trust can be by way of a lifetime settlement or by Will and can form part of the estate planning process to ensure your assets are protected.
Why set up a trust?
Any assets transferred into a trust during your lifetime will not form part of your estate after seven years have elapsed, provided you do not retain any actual or potential benefit from the assets transferred to the trust.
This means you can minimise Inheritance Tax, as well as ensure that your beneficiaries –such as loved ones or charities – enjoy the benefits of your wealth over the longer term.
There is nothing to prevent a person who creates a lifetime trust being appointed trustee, thus remaining in control of the assets and the decision making.
You might wish to set aside wealth in a trust that your children can use to fund tertiary education, but that limits their ability to access all the funds until a certain age when you may feel more certain that they have reached financial maturity.
This can help you ensure your children do not waste the funds you’ve provided for them.
You can also use trusts to provide a source of income for vulnerable and/or disabled family members who may not be able to manage their finances on their own or who might be on means tested benefits which they do not wish to lose by receiving an outright cash injection.
The same circumstances can equally apply to a Will trust.
Indeed, where appropriate, trusts are a way of dealing with the unknown, allowing your appointed trustees to make decisions in light of prevailing circumstances many years into the future. A discretionary element and flexibility can be of great benefit.
Setting up a trust
You should always seek professional advice when setting up a trust so that you can be sure of the implications of the same and the need for ongoing monitoring and administration.
If you’re leaving a trust in your Will, you must choose at least two (but no more than four) reliable trustees to look after the assets.
Once a trust is created, the trustees will have a responsibility to make sure that the trust assets are properly preserved for the benefit of the beneficiaries.
This may mean:
- Utilising the services of managing agents to look after property.
- Seeking independent financial advice as to the investment of cash.
- Keeping correct, up-to-date records of all dealings with the trust.
- Employing accountants to prepare annual accounts.
- Instructing professionals to make sure the trustees are acting in accordance with their powers and responsibilities set out in the trust document and in accordance with the law.
These tasks can be onerous, but they need to be dealt with correctly.
It is advisable to speak with your chosen trustees beforehand to make sure they are happy to take on the responsibilities involved with managing a trust.
Protect your assets in trust with Palmers Solicitors
Palmers Solicitors’ specialist lawyers can advise on and assist with the creation of trusts, the resultant tax implications, liaising with accountants where appropriate, and the management of a trust.
Our Wills, Trusts and Probate team consists of members of the Society of Trusts and Estates Practitioners (STEP), so you can be confident that we have the knowledge and expertise needed to help you protect your wealth for the next generation.
We can also help you prepare a Will that reflects your wishes regarding your estate, as well as support you with planning for later life care.
For more information about incorporating trusts into your estate plan, get in touch with our friendly team today.