What is a trust?
In broad terms, trusts are a separate legal body that can own and manage assets, they are run by trustees for named beneficiaries.
The main types of trusts
Why should I create a trust?
There are many reasons why you may wish to create a trust, for example:
- To securely pass on assets to future generations.
- Provide for vulnerable or disabled beneficiaries.
- Mitigate tax.
- Provide for children and partners from different relationships.
- Protect entitlements to means tested benefits.
- Set out joint property ownership arrangements.
- Minimise or eliminate the risk of assets being attacked on insolvency/bankruptcy or divorce.
- To retain control over assets you wish to give away and control and limit who can inherit from you.
What assets can a trust hold?
There are very few exceptions to the assets a trust can own, and trust assets typically include land, property, cash, shares, bonds, possessions, life policies and pensions.
When a lifetime trust is created, the Settlor will decide what assets are to be ‘settled’ or put into the trust. Ownership will be changed by a legal transfer from the Settlor to the trustees. For cash, the trustees will usually open a bank account. For a Will Trust special provisions must be included in the Will.
How is a trust created?
A trust is created by a Will if it to come into effect after death or while a person is alive by a trust Deed or a Deed of Variation. To be valid, a trust will usually set out:
- Who is creating the trust (the Settlor).
- The rules of how the trust is to be managed.
- What type of trust is being created.
- What assets are going into the trust.
- Whether other assets can be added later.
- Who is going to manage and administer the trust (the Trustees).
- Who can benefits from the trust (the Beneficiaries) and when.
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