Trusts

What is a Trust?

A Trust (also known as a Settlement) is a legal structure which allows assets to be managed by one or more persons on behalf of another person (or group of individuals). The terms of the arrangement are set out in detail in the Trust Deed, which will specify how or when the assets in the Trust can be distributed.

The main participants in a Trust are as follows:

the ‘settlor(s)’ – the person(s) who puts assets into the trust
the ‘trustee(s)’ – the person(s) who manages the trust
the ‘beneficiary’ – the person who benefits from the trust

Why set up a Trust?

Trusts are used extensively to preserve and protect family assets whilst also providing opportunities for minimising tax and estate planning. A Trust can be set up by the Settlor either during their lifetime or by means of their Will. Common reasons for establishing a Trust are:

to provide school and university fees for minors and young adults (such as grandchildren) who are not old or responsible enough to manage their own finances, or to protect the inheritance of a minor.
to manage finances for vulnerable family members, such as people struggling with mental health issues or addiction problems
to provide assistance with living expenses to family members suffering from long term illness or disability
to protect family wealth or keep family property within the family
to remove assets from the Settlor’s Estate for Inheritance Tax purposes whilst maintaining some control over how the funds are used
to provide flexibility in a Will regarding how the Estate should be distributed
to provide for a surviving spouse in a Will, whilst ensuring that the funds pass eventually to children and/or grandchildren

Trusts can be an excellent planning tool for Inheritance Tax, Capital Gains Tax and Income Tax but they can also give rise to tax liabilities for the Settlors, Trustees and (in some cases) the beneficiaries. If the only aim in setting up a Trust is to save tax, then it is advisable to first consider (with the help of a professional advisor) whether there are any other ways that this aim could be achieved.

What assets can be placed in Trust?

Any asset that can be transferred or sold to another person can normally be put into a trust. This includes:

Cash
Investments
Property
Land
Chattels (e.g. paintings, jewellery, antiques)

Types of Trust

Trusts come in various forms including Discretionary Trusts (where the Trustees have the discretion to choose who should benefit), Life Interest Trusts (where the beneficiaries have an entitlement to all the income), Vulnerable Beneficiary Trusts (which have special tax benefits) and Bare Trusts (where the beneficiary is the owner of the asset for tax purposes). Each type of trust will give rise to different tax implications and different rights and entitlements for the beneficiaries. Professional advice should therefore always be taken on the right type of Trust to suit your circumstances.

How we can help

Whether you are wanting to set up a Trust as part of a tax planning exercise, needing help with the administration of a long established family Trust or if you would simply like one-off advice on any aspects of running or winding up a Trust, our experienced Team will be able to assist. Our Dispute Resolution Team can also assist Trustees with any disputes that they might face.

Our services include:

creating and terminating Trusts
advising on the terms of existing Trusts
registering Trusts with HMRC and dealing with annual updates/declarations
administering ongoing Trusts (including the preparation of Trust Accounts and Tax Returns)
assisting with IHT Returns
drafting Deeds and Trustee Resolutions
providing tax advice in relation to all stages of a Trust’s life.

We act both as Trustees and for Trustees, providing a flexible service which allows you to arrange the level of support appropriate for your requirements.