Trusts are a way of protecting or sheltering assets for others. They can take various forms and often get a bad press as vehicles for the super-rich, but in fact they are very useful estate planning tools for anyone with property and savings.
There are many reasons for setting up a trust, and one of the more common reasons these days is where a spouse wants, on their death, to provide for their partner during the rest of their lifetime but wishes the assets ultimately to be inherited by their children. This may be particularly useful for a second marriage but where there are children from previous relationships. A trust can also be an effective way of making sure that the money you leave behind is well managed. If your beneficiaries are young or if they for example already have a reputation for excessive spending, a trust could ensure that they benefit from their inheritance in a way which enhances their life rather than encourages any bad habits. A trust can also be used to manage the assets of a vulnerable or incapacitated adult to ensure that there are sufficient funds for the rest of their life.
There are a number of different categories of trusts and within that a wider range of types of trust. What you decide upon will depend on what you are trying to achieve. In the case of transferring assets to someone under 18, an absolute (or bare) trust is the typical choice. The assets are put into the trust and the trustees make decisions on those assets until the child reaches 18. But if you want greater control or to extend the trust period beyond the 18th birthday of a beneficiary then a discretionary trust may be used where the needs of those benefiting from the trust may change over time and the trustees would need to use their ‘discretion’ as to how the assets are used. Trusts have to pay tax and the regime applicable differs depending on the type of trust.
Trusts may seem rather mysterious and old fashioned but with the right advice they can be an effective, modern way of making sure that the proceeds of a lifetime of hard work go to the right people for the right purposes.
If you would like further information about making trusts please contact us.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.