What is a trust and why might you need one?

A trust is an arrangement where you put an asset into the hands of trustees for the benefit of one or more beneficiaries. The trustees are responsible for looking after and investing the trust asset. The beneficiaries are the people who will benefit from the trust.

A beneficiary might be given
•    a right just to receive the income from the asset (interest or dividends) for the rest of their life (a “life interest”) or
•    a right to receive the capital at a later date (for example, when they reach the age of 18).

Another kind of trust is where the trustees have a discretion to decide who should benefit from the trust and how and when they should benefit (a “discretionary trust”)

You can set up a trust in your lifetime or provide for one in your will which will then be set up when you die.

There are many reasons for setting up a trust. These include:-

•    saving inheritance tax when you die

•    minimising care home fees.

•    ensuring that your spouse is provided for after you die but also that your children will receive the capital after he or she dies

•    ensuring that a gift for a child is properly looked after until he or she is old enough to look after it themselves

•    ensuring that there is flexibility after your death so that all of the circumstances at that time are taken into account before it is decided how your estate should be dealt with

•    providing for a disabled relative who is unable to look after money or property themselves to benefit from your estate

If you would like advice on whether a trust would be helpful to you, please contact Peter Harris or James Carr in our Private Client Department on 01785 211411. They will be happy to discuss this further with you and to draw up any necessary documents for you.

7 September 2009

Disclaimer

The contents of this article are for the purposes of general awareness only.  They do not purport to constitute legal or professional advice.  The law may have changed since this article was published.  Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.