A trust separates legal ownership from benefit. You transfer assets to trustees, who hold and manage them for the people you want to benefit, on the terms you set. It is an old and flexible arrangement, and it is useful in a narrow set of circumstances rather than a universal solution.
We will tell you plainly when you do not need one.
A discretionary trust gives trustees the power to decide who benefits and when, from a class of people you name. It suits families where circumstances are unpredictable — a beneficiary who is young, unwell, in debt, or in a difficult relationship.
A life interest trust gives one person the right to income, or to live in a property, with the capital passing to others afterwards. It is the usual answer where someone wants to provide for a second spouse while making certain that children from a first marriage eventually inherit.
A bare trust holds assets for a beneficiary absolutely, who becomes entitled at 18.
A trust for a disabled or vulnerable beneficiary can protect means-tested benefits while providing for someone properly, and may qualify for favourable tax treatment.
Will trusts come into existence on death under the terms of your will, rather than during your lifetime.
A trust is not a document you sign and forget. Trustees owe a statutory duty of care under the Trustee Act 2000, must invest suitably and review those investments, must keep accounts, and must act impartially between beneficiaries.
Most trusts must also be registered with HMRC through the Trust Registration Service, and kept up to date. Trusts carry their own inheritance tax treatment, including charges on each ten-year anniversary and when capital leaves the trust.
Trusts are widely mis-sold. If you have been offered one as a way to avoid care home fees, sidestep probate, or remove your home from your estate while carrying on living in it, be sceptical — schemes of that kind frequently fail, and can leave families worse off than doing nothing.
We will give you an honest view of whether a trust helps in your situation, what it will cost to run, and what it will not achieve.
We advise on whether a trust is appropriate, draft the deed, help you choose and brief trustees, deal with registration, and support trustees with their ongoing duties.
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