Demystifying TrustsJanuary 11, 2018
The word “trusts” often evokes Dickensian images of quill pens, old fashioned deeds and of the case Jarndyce v Jarndyce, which was immortalised in the novel “Bleak House”. Many of you will also recall the “entail” in the television series “Downton Abbey” which was the unlikely matchmaker in the union of Matthew and Lady Mary.
There is a common misconception that trusts are solely for the use of the very wealthy. Trusts are available and accessible to all people and should be considered by all families. They allow people to protect their assets and control how they are used after they have been given away. Andrew Williams, Wills, Probate, Tax & Trusts Solicitor explains.
When to consider a Trust?
Trusts can be created during your lifetime and put into effect upon your death. When you put assets into a trust, you can set out in the trust document how those assets are to be dealt with. The trust document, should be prepared by a suitably qualified professional, to ensure you achieve your desired outcome.
Ensure your wealth is spent wisely. You may wish to give away some of your wealth to benefit other members of your family but you may be concerned that this will be dissipated or frivolously spent. A trust can restrict the amount and type of benefit received from the assets placed in trust. For example, you may wish to assist a grandchild with university expenses but not want them to spend the money on a fast car. A trust is the ideal vehicle to achieve this end.
Which trust is best?
Trusts fall broadly into two main categories:
- Life Interest Trusts: This sort of trust is popular in the wills of people marrying for the second time, where there are children from a former marriage. It will ensure that the spouse is provided for, but that the children of the former marriage do not see their parent’s wealth passing to the children of the surviving step-parent.
- Discretionary Trusts: These trusts give the trustees power to distribute income and capital at their absolute discretion to any one or more of a stated class of beneficiaries. This is the most flexible form of trust because if the personal circumstances and/or the financial needs and resources of any beneficiary change, then the trustees can manage the trust to reflect this.
Special Trusts can be used to benefit disabled beneficiaries. They can also be used to keep life assurance benefits from being subject to tax whilst ensuring that the lump sums are payable immediately on death without any possible delays created by the probate process.
Many grandparents will often set up a Bare Trust to help future generation’s school and university fees or to support a property purchase.Trusts can also be used for other purposes such as following the purchase of your home or if you have receive compensation for a personal injury claim.
Get in touch
For further information on how trusts can work for you, please contact one of our specialist lawyers at Burroughs Day. We also invite you to join our seminar where we’ll be discussing Trusts as one of your planning for later years tools.