Setting up and Administering a Trust Knowledge & Resources

A trust is set up to give assets (for example property or money) to other people (the trustees) to hold for the benefit of others (the beneficiaries). A trust can be used as a practical tool for inheritance tax planning.

Trusts can be set up in your lifetime and activated straight-away, or within your Will so that they are activated upon death. The legal wording of a trust needs to be precise and requires legal advice.

A trustee is a person or company who controls the money or assets held within the trust. They are responsible for dealing with the money or assets for the benefit of one or more people (the beneficiaries).

This depends on the type of trust that is set up and also the trust documentation. For example, if the trust is benefitting one person during their lifetime then it is usual for that person (known as a life tenant) to receive all interest from the trust for the duration of their lifetime.

This depends on the type of trust that is set up and also the trust documentation. For example, if it is a discretionary trust then the trustees will use their discretion to pay out for purposes that they deem to be reasonable. When setting up the trust, it is recommend to include a side letter of wishes to give trustees some guidance about when they should pay out to the beneficiaries.

If the money is in a discretionary trust or life interest trust then, should the beneficiary require care fees, the money in trust will not be taken into account. However, if the person who makes the trust requires care fees then they need to be aware that the local authority could query the gift(s) into trust if they were made when care fees were anticipated as this could be seen as a deliberate deprivation of assets which is not allowed.

A discretionary trust allows a trustee to make certain decisions about how the income, and sometimes capital, from the trust is used.

A pilot trust is a type of discretionary trust set up during the lifetime of an individual. They were set up as a way of protecting an estate against future inheritance tax. A pilot trust allows the individual to receive funds and/or property upon their death from a legacy in their Will, a pension fund, a life insurance payout or a death-in-service benefit. Pilot trusts are also known as feeder trusts or family bypass trusts.

Trusts can be set up in your life-time, to be activated straight-away, or within your Will so that they are activated upon death. The trust should set out the people you wish to benefit from the trust (the beneficiaries).

The legal wording of a trust needs to be precise, so you should ask your lawyer to set it up.

For example, if the trust is a discretionary trust then the trustees will use their discretion to pay out for purposes that they deem to be reasonable. Therefore, when setting up the trust, your lawyer is likely to recommend that you put in place a side letter of wishes which sets out the types of purposes that would be reasonable so that your trustees have some guidance about when they should pay out to your beneficiaries.

A trustee is a person or company who controls the money or assets held within the trust. They are responsible for dealing with the money or assets for the benefit of one or more of the beneficiaries. You may choose to appoint professional trustees and we provide this service.

Trustees owe a duty of care and skill to the administration of trusts and it is important that they act in accordance with these duties at all times.

Depending on the type of trust in place, tax may be payable on money held on trust. You should ask your solicitor about this when you take advice on setting up the trust.