A Trust is a way of managing assets (money, investments, land or buildings) for people. There are different types of Trusts and they are taxed differently.
What is a Trust used for?
Trusts are set up for a number of reasons, including:
- to control and protect family assets
- when someone’s too young to handle their affairs
- when someone cannot handle their affairs because they’re incapacitated
- to pass on assets while you’re still alive
- to pass on assets when you die (a ‘Will Trust’)
- if a Beneficiary has an addiction problem or cannot be trusted to use the inheritance wisely, the Trustees can manage this for the intending Beneficiary whilst protecting their inheritance
What does a Trust involve?
A trust is an arrangement were a trustee holds assets on behalf of a beneficiary or beneficiaries. Trusts can specify exactly how and when the assets will pass to the beneficiaries.
The Settlor decides how the assets in a Trust should be used – this is usually set out in a document called the ‘Trust deed’. Sometimes the Settlor can also benefit from the assets in a Trust – this is called a ‘settlor-interested’ Trust and has special tax rules.
The Trustee deals with the assets according to the settlor’s wishes, as set out in the trust deed or their will. They also manage the trust on a day-to-day basis and pay any tax due.
A Trustee will also decide how to invest or use the Trust’s assets, if needed. If the Trustees change, the Trust can still continue, but there always has to be at least one Trustee.
There might be more than one Beneficiary, like a whole family or defined group of people. They may benefit from;
- The income of a Trust only – for example from renting out a house held in a Trust
- The capital only – for example getting shares held in a Trust when they reach a certain age or both the income and capital of the Trust
See our Trust services for more information;