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Should I set up a trust?

In simple terms, 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.

Historically trusts were about handing over control of assets owned by one individual (”the Settlor”)  to trusted persons (“trustees”) to look after on behalf of the Settlor. Originally this was done when the gentry decided to go crusading and needed someone to control their assets whilst they were away.

In a modern context trusts have all sorts of uses, the main uses of which are:

1. Control

Trustees can control assets on behalf of the “settlor” either:

  • During the settlor’s lifetime e.g. because of some sort of disability on the part of the Settlor, simply because the settlor wishes to hand the decision-making process to a third-party or because the Settlor wants to make a gift (perhaps for inheritance tax planning purposes) but doesn’t want the beneficiary of that gift to have control of the asset or
  • After the settlor’s death (usually in their Will), when the settlor wants his wishes concerning the future use of assets to continue to be respected.

2. Protection

The Settlor can create a trust either during their lifetime or by Will with a view to protecting the asset from or for the beneficiary. This is often done if the trustee is concerned that the intended beneficiary may waste the asset if received by them (possibly due to negative influences from a 3rd party or because as a result of a disability the beneficiary is not in a position to look after the asset themselves) or because the beneficiary is in a difficult situation which may make it unwise for them to receive the asset personally e.g if they are in receipt of benefits or in an unstable relationship.

3. Beneficial ownership

Beneficial ownership of an asset is more complex than simple ownership and various types of beneficial ownership can be created by trusts. If I simply own a house, it is mine, I can do what I want with it and that is that. Under a trust I can set up a situation where someone else has the use of the asset for life but does not own it or control it (this is known as a life interest and is often seen in wills where there is a 2nd marriage). Using a trust I can specify that young beneficiaries become entitled to the asset, but only if they reach a certain age or if the trustees consider them to be responsible. A trust can also be used to provide for the home to be managed on behalf of someone who is unable to do this personally.  All the above are types of beneficial ownership. These days family life seems to be much more complicated, and passing on assets often involves much more subtle solutions than simply gifting the house outright to someone else.

So, the point I am making is that trusts are about much more than tax.

For people who have complications in relation to their assets and/or personal circumstances, trusts may be the solution whether or not they help with tax planning.

Specialist trusts and inheritance tax solicitors

At Gregg Latchams we offer clients strategic advice relating to trusts, including:

  • Taxation issues
  • Trust creation
  • Preparation of trust documents
  • Professional trust administration service
  • Advice and assistance to Trustees
  • Expertise as members of the Society of Trusts and Estate Practitioners

For a no-obligation discussion with one of our specialist tax and trust solicitors in Bristol or London, please call 0117 906 9400 or email enquiries@gregglatchams.com

 

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

Categories: Tax and Private Wealth | Personal Legal Services

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