There are many reasons for creating a trust rather than making an outright gift to someone.
These include the need for control and protection of assets, saving tax, providing for family members or dependants who may be too young, irresponsible or unable through disability to manage the assets themselves.
A trust is a way of managing assets for people, often family members. The person creating the trust - the settlor - transfers property to his trustees who become the legal owners of it but on the terms set out in the trust deed or will that creates the settlement.
The trustees have a duty to ensure that the settlor’s wishes are carried out. They look after the trust fund on behalf of the beneficiaries who receive the benefit of the assets either by way of income or capital, or both.
Trusts can take effect during the settlor’s lifetime or under the terms of a will. Common types of trust include:
- Life interest trusts where provision is often made for a surviving spouse or partner for the rest of their lifetime. They will typically receive all income produced by the capital assets invested but on their death the benefit will pass to others, usually children and/or grandchildren. These trusts can be particularly useful where there are children from a previous relationship.
- Discretionary trusts where the trust fund is left to a group of beneficiaries and the trustees have the right to decide who will benefit under the trust and how much they will receive. Assets put into a discretionary trust do not form part of the settlor’s estate on death and so will not attract inheritance tax.
- Accumulation and maintenance trusts are set up to provide for children who are too young to receive income and capital themselves. Trustees have the power to ensure trust money is applied for the benefit of the children until they are old enough to make their own decisions.
We can assist with creation, management and termination of trusts, whether it is initial advice on creation and the appointment of trustees, assisting those already appointed as trustees, completing and filing tax returns or distributing income and or capital from the trust fund.
We also advise upon, create and manage personal injury trusts in the context of accident claims and protection of compensation where accident victims are dependent on means-tested benefits.
Don’t wait for the taxman to take it away! Contact us now. Email or telephone 01460 200450.