The basics - Trusts
Samantha Turner, 2nd September, 2024
We're often asked lots of questions relating to trusts, so we've provided this handy guide on some of the basics.
Trusts are legal documents created by a person known as the Settlor for varying reasons including; financial planning for future generations/blended families, protecting vulnerable people, tax and/or care fee planning.
The types of Trusts:-
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Bare Trusts – provide the beneficiary(ies) with an immediate interest in the Trust asset(s) and often arise when a minor is a beneficiary under a Will. The minor has a right to the income and will attain a right to the capital asset(s) immediately on reaching 18 years of age.
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Discretionary Trusts - allow the Settlor to include various beneficiaries and gives Trustees the power to decide how, when and who benefits from the Trust asset(s). Beneficiaries don’t have an automatic right to the asset(s) and so they do not form part of their estate for Inheritance Tax purposes or means tested benefits / care fee liability purposes. They are often beneficial for future generational financial planning.
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Interest in Possession Trusts – allow the Settlor to provide a beneficiary or beneficiaries an immediate interest in trust assets (income and/or capital) during their lifetime and on their death direct the remainder to another beneficiary(ies) absolutely or as decided at the Trustees discretion. These types of trusts are commonly seen in Wills to protect assets for children of blended families but can be made during a Settlor’s lifetime.
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Vulnerable Beneficiary Trusts - can be any of the above types of Trusts but the primary beneficiary is deemed vulnerable due to being a bereaved minor or having a mental or physical disability and as such have beneficial tax treatments.
Creating a Trust may have tax implications and so it is important to take appropriate professional advice. It is also necessary to comply with HMRC Trust Registration Service requirements as failure to do so may result in financial penalties.
Need further help?
Understanding trusts can be complicated, so we recommend you speak with a member of our friendly team if you would like any further help and support. For more information, see our Wills & Probate page, or call today on 01482 324252 for a no obligation chat.
