How To… Set up a Bare and Simple Trust
What is a bare trust?
A trust holds your assets
for the benefit for someone else. Those that benefit from the trust are known as 'beneficiaries'
. In a bare or simple trust
, the beneficiaries will have a right to the assets and any income from these assets.
The assets or 'capital' could be money, property, land etc. The income relates to the money made from the capital such as interest. Therefore in a bare trust compromising of money, the beneficiary will have a right both to the money and the interest
Who holds the property in a bare trust?
In a bare trust the ‘trustee’ holds the property in their name - the trustee must be appointed by you
to look after the trust.
The trustee has no say or discretion over what passes
to the beneficiaries from the trust. So, you can be sure that what you intended to pass on to your loved ones will be kept safe.
Why should I set up a bare trust?
Bare trusts are commonly used to transfer assets
to children under 18.
For example, if you are a grandparent and you do not want your grandchild to inherit too much too young
, you may consider setting up a bare trust. This will allow the child to grow and mature so the assets and income can be released to them when they turn 18.
Why do I need a solicitor?
A trust is just like a contract and the wording in your will or trust deed needs to be specific
to ensure your wishes are fulfilled. You need to make sure that after your death the trustee has clear instructions about how to manage the trust.
Firstly, you should find yourself a good solicitor. They will be able to help you nail the legal wording down
and make sure that your trust is valid.
A trust is invalid if the following things are not certain:
- It must be clear that the settlor, the person creating the trust, intended to make it
- It must be clear what property is part of the trust
- It must be clear who the beneficiaries are
Compile a list of assets that you wish to put in the trust and how you want them to be distributed
when you pass away. A solicitor will help you specify what the role and responsibilities of the trustee are - which usually involves the trustee transferring the assets
in the event of your death.
The trust deed will then need to be signed by you, your trustees and 2 witnesses
. Finally a solicitor can then help you transfer the assets in the trust into the trustee's name, eg. John Smith and the John Smith Family Trust.