A Trust can be an effective way to pass on your money to your family while retaining control over how it is used – either during your lifetime or after your death.
Protection, flexibility and privacy are areas usually front of mind when people think about this, and Trusts can help you achieve all three.

What is a Trust?

It is important to understand what a Trust is and what benefits a Trust can provide.  A Trust is a flexible way of giving away assets without passing them absolutely to beneficiaries. The purpose of a Trust is to help families control how assets such as a cash, investment or property are handled over to the next generation. 

A Trust is a legal relationship which is created when you as a settlor transfer asset to two or more people (the trustees) with instruction that they hold the assets for the benefit of your loved ones (the beneficiaries). 

To achieve this, the Trust separates the legal ownership of the assets or property from the beneficial ownership. The legal ownership of assets is given to the trustees who are bound by the terms and conditions of the Trust deed and subject to general Trust law. It is their duty to hold and administer the Trust property in the best interests of your chosen beneficiary(ies) who will ultimately benefit from it.

What are the benefits?

Privacy: Whereas a Will is a public document that anyone can request a copy of once it has been admitted to probate, Trusts are semi-secret documents for the eyes of the Trustees alone. Who you have chosen to benefit from your estate will therefore remain private.

Different Beneficiaries: You can name different beneficiaries in different Trusts. This will ensure privacy and separation of all parties, as the beneficiaries of a Trust will not be involved in the use of funds for any other if they are not parties to the settlement.

Autonomy and management: You can appoint different Trustees to different Trusts if desired. This means that control and decision making powers can be in the hands of different people for different Trusts, which allows privacy and separation for the Trustees of each Trust.

Costs: Where the Trustees of a Trust are concerned with one family or branch of the family as opposed to numerous members with different needs, the management of the Trust can be simpler and therefore cheaper. A group of simple Trusts is much simpler to manage than a single Trust with many purposes, mixed assets, multiple beneficiaries and more potential for conflict amongst them.

In complex family situations, trusts can help to smooth financial issues, clarify inheritance intentions and avoid disputes.

Trusts aren’t just for the super-wealthy either. There are many reasons for setting up a Trust:

  • Protection against the most common things that might threaten your family, such as care fees of the surviving spouse, marriage after death, creditors or bankruptcy, divorce or separation of a beneficiary, further or generational Inheritance Tax;
  • Assurance that your wealth is passed fairly and privately among family members, including those not born yet;
  • Making sure that a dependant relative will be cared for in the future;
  • Controlling distribution of the assets. If you don’t trust your beneficiaries to directly own the assets you want them to have (perhaps because they are minors or just frivolous with money), you can distribute assets to them over time through a trust;
  • A trust can be set up with the purpose of providing gifts to your favourite charity. 

Inheritance Tax, Legal services, Trusts, Will writing and Estate planning are not regulated by the Financial Conduct Authority.

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