In many respects trusts are regarded as being old-fashioned and cumbersome. Since 2006 the reporting requirements of trusts have increased including the recent introduction of the Trust Registration Service.
However, Trusts are still useful in certain circumstances, particularly where there are concerns regarding the safeguarding of assets.
In its simplest form the creation of a trust transfers the ownership of an asset by a person or persons (settlor) to another person or trust company (trustees) with instructions to hold those assets for the benefit of others (beneficiaries).
A trust separates the legal ownership from the beneficial ownership. They can be set up in lifetime or on death as part of the distribution of the estate.
For most people, however, the type of trust they are most likely to be asked to make decisions about personally is a trust established to arrange their family’s financial affairs. In this context, the main attraction of trusts is that they give the settlor greater confidence in how assets will be used in the future. Put simply, trusts offer a means of holding and managing money or property for people who may not be ready or able to manage it for themselves. Indeed, discretionary trusts can be created to benefit people who are not even born yet – such as any future grandchildren someone may have.
Some of the most common family situations where trusts are used (often in conjunction with a Will) are:
- To provide for a husband or wife after death while protecting the interests of any children; this can be particularly important for families where there are children from previous marriages.
- To protect the inheritance of young children until they are old enough to take responsibility for their own affairs.
- To provide for vulnerable relatives who are unlikely to be able to look after their own affairs.
- To help succession planning in a family business.
It is clear that trusts are particularly useful when planning how money and assets should pass from one generation to another, especially when family structures are complicated by divorces and second marriages. This, coupled with the growing frequency of marriage breakdowns, makes trusts an excellent tool for making long-term plans to ensure a family’s financial security.
What can we do to help?
- Assist you in considering if trusts meet the requirements for protecting your assets for future generations.
- Explain to you the different types of trust and how these provide income/enjoyment of assets for the beneficiaries.
- Assist you in deciding how to structure the trust, how to choose trustees and identify the beneficiaries or class of beneficiaries.
- Advise you on the compliance requirements of a trust including trust registration, accounts and taxation.
- Advising you on the duties of trustees and their duty of care.
- Attend trustee meetings if required.