How Do You Set Up A Trust?
A trust is an agreement, and like most legally binding agreements it must be recorded in an extremely detailed, carefully worded and correctly signed document. This document will record the assets placed, or to be placed, in the trust as well as the identities of the trustees you have selected to manage the trust for you and the beneficiaries you intend to benefit from the trust.
Once a trust is created, it is irrevocable, meaning you cannot dissolve the trust and reclaim your assets. Trust management is also a lot of responsibility, so you need to think carefully about what you wish to place in your trust fund and who you choose to administrate it. Consulting a Solicitor with legal knowledge of trust law and estate administration is highly advisable before taking any steps to set up a trust.
What Are The Different Types Of Trust?
There are many different types of trust, and which one is most useful to you will depend on your specific needs. Some of the most common types of trust are:
- Bare Trust: this is the simplest type of trust, and grants complete access to all assets in the trust to the beneficiary as soon as they are 18 years old
- Interest In Possession Trust: this trust allows a beneficiary to gain income from interest on assets in the trust immediately, but they will not be able to gain access to the assets themselves
- Discretionary Trust: trustees of a discretionary trust have complete control over the assets and income generated, and can choose when and how to give these to the beneficiaries
- Mixed Trust: a mixed trust combines elements from the different trusts listed above
In addition, there are different rules and tax exemptions if the trust is set up to benefit a vulnerable person or to take care of someone with a disability or medical condition.
Essentially this means that a trust can be tailored to meet your specific needs, and how exactly your trust functions is something you will be able to decide with the help of your Solicitor.
When Would A Trust Be Useful?
You might consider setting up a trust for any number of reasons. If you wish to leave assets to family but are not certain that they will act responsibly if given a lump sum, a trust can be set up to pay an income instead.
If you have grandchildren, you can set up an interest in possession trust to allow your children to take an income from the interest generated by your assets while safeguarding the assets themselves for your grandchildren. This is just one of the ways a trust can be useful in establishing a lasting legacy that ensures multiple generations of your family will benefit from your estate.
Trusts can also be set up to benefit charities and other organisations, should you wish to use your estate to benefit a cause you care about.
What We Can Offer You
Setting up and administrating a trust is complex, and requires expert knowledge of trust law, tax rules and exemptions, and a broad knowledge of estate planning and probate. Our Private Client team have extensive experience setting up trusts for clients with estates of all sizes and many different needs. We can advise on the best type of trust for you and can assist you if you are trustee concerned with meeting the responsibilities you have been given. If you would like to find out more, please contact a member of our team today.
Our Past Cases
Below are some examples of matters dealt with by our Private Client team in relation to trusts:
- Advised clients who wish to set up trusts for various purposes such as estate planning, asset preservation and protection of vulnerable beneficiaries.
- Advised Trustees regarding their role as Trustees and their options, particularly in relation to Discretionary Trusts.