WHY YOU NEED A TRUST

There are many different types of trust… Here are our top six

What is a Trust?

Put simply, a trust fund is a way of protecting your assets to ensure financial stability for your loved ones. When you put assets in a trust, they are under the control of an appointed person or persons known as trustees. The trustees are responsible for managing this trust in line with your instructions. Many people opt for trust funds for many different reasons, meaning most of your assets are passed on to the specified people. Trusts can also help protect people who are vulnerable or people who have trouble managing their finances.

Trusts can be set up during your lifetime, or you can leave details of a trust in your Will, explaining what you would like to happen to these assets. There are various types of trusts available, the one you choose will ultimately depend on the amount involved and how you want it to be used.

Why do I need a Trust?

Unlike a Will, a trust can be tailored at a more in-depth level, so you can specify in detail who benefits from your assets. A common example would be allowing one beneficiary to live in a property, but if sold requesting that the money goes to a different beneficiary.

There are many benefits to using a trust. It allows you to provide for people who struggle to manage their finances, mentally unwell people and those who are under 18 and not legally allowed to inherit. You can also protect yourself against divorce and mitigate inheritance tax to ensure your loved ones receive the maximum amount.

Bare Trusts

These trusts are most commonly used to pass assets on to younger people who have not yet reached 18 years of age. In the meantime, assets are held in the name of trustees, meaning that the beneficiary only has a right to this income until they have reached the age specified.

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Interest in Possession Trusts

These are trusts which outline that a trustee must pass on all specified income to the beneficiary as it arises. An example of this would be if you created a trust for any property that you owned, and state in your trust that in the event of your death, the income from the property goes to your spouse for the rest of his/her life. When your spouse passes away these shares will be passed down to your children.

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Discretionary Trusts

A discretionary trust authorises your appointed trustees to manage your estate at their discretion. This means they can decide how, when and who to distribute it to.

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Mixed Trusts

This refers to the combination of several different trusts.

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Long Term Care Costs

Settlor-Interested Trusts

A settlor-interested trust is one where the person who created the trust, – the settlor – keeps some, or all of, the benefits related to the property which they have given away. For example, a settlor may choose to transfer assets to trustees to benefit themselves, meaning any income from the assets of the trust will be paid to them.

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Trusts in Wills

The types of trusts included in your Will are the same types as listed above, but only come into effect after you have died and will ultimately depend on your circumstances. The uses and benefits of trusts can be a little complex which is why we always spend the necessary time explaining them clearly and thoroughly.

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Wills vs trusts: what’s the difference?

Both Wills and trusts are extremely important documents when it comes to estate planning, and while people are generally familiar with both terms, the differences between them are not always known. Some trusts are activated when the grantor or settlor signs then trust deed and can be used to make arrangements before or after death. However, there are many different types, and this isn’t true for all. By contrast, a Will only comes into effect once you pass away.

Following your death, a Will passes through probate. This means that a court must establish the Will is valid and oversees the administration of the Will to ensure that the property gets distributed the way you wanted. Your beneficiaries will not need to go through Probate to access the assets left to them in a Trust. This means that this often-onerous task can be largely avoided, which means less stress and cost for your loved ones. A Trust also remains private, unlike a Will which becomes a public document.

How we can help

The thought of setting up a trust might seem overwhelming, as there are many different types with each one used for different things. We’ll be happy to talk you through the various trusts and find the one best suited to your circumstances. We can help you set up a trust to safely pass on assets to the next generation, fund education for your children and grandchildren and provide for vulnerable loved ones. We appreciate that making these decisions is a very personal process and assure all our clients that we handle each situation with the utmost sensitivity.