What is a Trust?
A trust is when one person is given property to hold for the benefit of another. Setting up a trust allows you to direct certain assets to specified beneficiaries and gives you peace of mind that your estate is organised according to your wishes.
There are different types of trust suitable for different situations, including:
• Liferent trusts
• Discretionary trusts
• Charitable trusts
Who is Involved in the Trust Process?
There are three main parties involved in the establishment of a trust:
• The settlor – this is the person who establishes the trust and decides which assets are to be held by the trust;
• The trustees – these are the people who hold the trust property for the benefit of the specified beneficiaries; and
• The beneficiaries – these are the people who will benefit from the assets held in the trust.
Why are Trusts Created?
Trusts are created for many different purposes. They are traditionally used to protect family assets to ensure that they pass down the generations at an appropriate age and to ensure that assets do not pass outside of the immediate family. More often than not, trusts are used as part of financial planning to protect family wealth.
Trusts can also be established for tax efficient purposes, to protect against division of assets on divorce and to protect assets for those who are disabled or vulnerable.
It is, however, important to bear in mind that there are certain charges applicable to trusts, particularly if assets held are over the Inheritance Tax threshold of £325,000. Dependent on the type of trust, there can be charges levied whenever money is paid out of the trust and, in some cases, on each 10-year anniversary of the trust.
If you would like to find out more about trusts and how they might be appropriate for your own personal circumstances, please contact a member of our Legal Team.
North Berwick - 01620 892138