On a basic level, trusts are a means of making it easier to control assets and managed. It is important to know how to set them up and what is most appropriate.
In the past, trusts were set up in order to reduce tax liabilities. Recent changes in tax rates have meant this is not so much the case now.
There are other benefits. One reason is that it provides more effective inheritance planning and transference of assets. It can also be useful for looking after assets for children under the age of 18 or someone who is not capable of handling their own finances (for example, if they have severe mental health issues).
It is also possible to set up a trust as a contingency in case you want to make provisions for a child or in the event of a decline in physical or mental health.
Broadly speaking, there are three parties involved in establishing a trust. The first is the settlor, who is the person who creates a trust, appoints a trustee, and established the rules that must be followed when managing and passing on assets.
A trustee has to manage the assets that will be passed on to the beneficiary. It is possible for a trustee to benefit, but this needs to be specified in an arrangement.
The beneficiary will be made aware of the rules involving their trust. It is also important that they follow any instructions in order to receive the assets that are eventually passed on. For example, some settlors may specify that certain funds are expected to pay for university education and expenses incurred during study.
A trust deed will be drawn up. This will establish the roles involved with the trust and what will eventually be passed on to the beneficiaries. A part of this deed will include fiduciary duty- this covers the responsibilities of a trustee. If it is felt that a trustee is not keeping up their fiduciary duty (for example, they may not be investing money in a way the settlor approves of), then it may be necessary to appoint a new trustee.
There are different types of trust. What you choose will depend on your circumstances. These include charitable, revocable (where the details can be changed depending on certain circumstances), irrevocable (where the details can’t be changed), or law imposed.
You can also have trusts where you transfer everything at once or an amount over a certain period.
We can help
It is important to make sure that the trust deed is valid. You want to be sure that everything is handled properly and legally, ensuring that you get the full benefit from establishing the trust. At Larcomes, we provide experienced trust law professionals with the resources they need, as well as the customer service to keep you informed during the process. For more information or to discuss the legal issues around this, please contact us today.