What Type of Trusts are Available?
There are many different types of Trusts available in England and Wales and they can be used for different purposes. The main reason to use a Trust is usually to protect and manage financial assets. These assets could be money, land, property or investments.
Types of Trusts
- Will Trusts
- Discretionary Trusts
- Trusts for Vulnerable Beneficiaries
- Bare Trusts
- Personal Injury Trusts
Below we explain each type of Trust and what they’re used for.
For initial legal advice on setting up a Trust, call our Wills and Trusts Solicitors.
A Will Trust, sometimes known as a Property Trust, will suit you if you are married or in a civil partnership. Using a Will Trust means you can protect your share of the property from care home fees, make sure your partner or spouse can stay in your property when you die and make sure that your children will receive at least half of the property in their inheritance.
Before you make a Will Trust, you’ll need to make sure that you own your property as Tenants in Common rather than Joint Tenants so you can protect your share of the property.
Here’s an example of how it works:
Mr and Mrs Jones jointly own their home and want to leave their share of the property to their children when they die. They also want to make sure that at least half of the property is protected if their surviving spouse needs care or has to going into a care home.
Mr Jones dies and his share of the property is placed into a Trust. Mrs Jones can continue to live there.
If Mrs Jones needs to pay for her care in the future, only her half of the property is eligible when the care fees amount is being assessed by the Local Authority, and the property cannot be sold to pay for care fees. Mr Jones’ half of the property is protected as it’s in Trust and will pass to the children when Mrs Jones dies.
If Mrs Jones does not need care and stays in the property until she dies, her half of the property goes to the children along with Mr Jones’ half, which was left in Trust.
A Discretionary Trust allows the Trustees to make decisions about how to use the income (and sometimes the capital) from the Trust. Depending on how the Discretionary Trust is set up, Trustees can make decisions like:
- Which beneficiaries will receive payments
- Whether income or capital is paid out
- When payments are made
- If there are any conditions on the beneficiaries.
A Discretionary Trust can be used for beneficiaries who cannot deal with their finances themselves or are not responsible enough to. They can also be used if certain beneficiaries will need more help throughout their lifetime than others.
Trusts for Vulnerable Beneficiaries
This type of Trust works well for children or disabled people as it is taxed differently. As a result, there is an eligibility criteria for these kinds of Trusts.
A vulnerable beneficiary is a child, under the age of 18 whose parent has died or someone with a disability who qualifies, but does not necessarily receive, any of these benefits:
- Attendance Allowance – the care component has to be at the middle or higher rate or a higher rate mobility component
- Personal Independence Allowance
- An Increased Disablement Pension
- Constant Attendance Allowance
- Armed Forces Independence Payment
If someone cannot manage their affairs because they have a mental health condition, they may also be classed as a vulnerable beneficiary but you should check with a medical professional to make sure it’s covered in the Mental Health Act 1983.
A Bare Trust is usually used for passing assets onto young people. The beneficiaries of a Bare Trust are allowed to access all income and capital from a Bare Trust as soon as they are 18 years old (England and Wales only).
When a Bare Trust is set up, all the assets are held in the name of one of the Trustees, rather than in the beneficiary’s name. The Trustee will look after the assets until the beneficiary is old enough to access the Trust.
By setting up a Bare Trust, the person leaving the money can make sure that it all goes to the beneficiary.
Personal Injury Trust
A Personal Injury Trust is used after someone suffers from life-changing injuries in an accident and they get a large amount of compensation from a personal injury or medical negligence claim.
The money they receive will contain amounts to pay for their future care, loss of income and rehabilitation among other things.
A Personal Injury Trust can be used to make sure the injured person can claim all the state benefits and funding for their care, and that they have a system in place to manage the money for the future.
For free legal advice call our Wills and Trusts Solicitors
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