What is a trust and how do I set one up?
Trusts are a way of looking after property, money or other assets on behalf of
A trust consists of:
- A settlor - places their assets into the trust and sets out their wishes in a trust deed
- A beneficiary - benefits from the trust
- A trustee - in charge of the trust and taking care of the settlor’s wishes
For example, a parent who is the settlor may want to set up a trust
for their child. His child would be the beneficiary of that trust. He will have to pick a trustee to take care of his wishes
upon passing away, this could be another family member or a friend. This is now a trust.
What are the Benefits of Setting up a Trust?
There are a number of benefits
to setting up a trust. These include:
- Guaranteeing an income for your loved ones
- Safeguarding your compensation after a personal injury claim
- Protecting your assets such as your house from being used to pay for care home fees
- Ensuring that someone who is old or disabled has their money looked after appropriately and in a way that they keep their means tested benefits
What are they different types of Trust?
There are a variety of different trusts you can set up but the main ones are:
Bare or ‘simple’ trusts - to transfer money or property to minors, who then have an immediate and absolute right to assets
in the trust. Minors are often referred to as people who are not old enough to hold property
personally. This age is usually 18.
Interest in possession trusts - the beneficiary has the right to the income from the trust property
but not the property itself, which will pass to other beneficiaries in the future. The income of the property is the interest made from the property itself if the property is shares.
Discretionary trusts - trustees have the power to use the income from the trust
, to which they may or may not be allowed to add funds to, and in turn this becomes part of the trust
How do I set up a Trust?
A trust can be set up through a trust deed or a will
. A trust deed is a legal document setting out the wishes of the deceased.
Due to the broad powers and responsibility placed on a trustee, the wording of a trust needs to be specific. You should always ask a solicitor to do this for you
to ensure that your wishes are followed with.
You should carefully consider who you want to act as your trustees. Family or close friends are the obvious option and they will be people you can rely on
. You need to appoint between 2 -4 trustees.