We know that understanding how a Trust fund works can be quite difficult, but that’s why we’re here to help. Although there are many different types of Trusts, there are always three different roles played within a Trust, with each person having different rights and responsibilities.
The three roles within a Trust are:
- The ‘Settlor’, who puts the assets into the Trust,
- The ‘Trustee’, who manages the Trust, and
- The ‘Beneficiary’, who benefits from the Trust.
The Settlor is also the person who decides how any assets in a Trust should be used. They will usually have to confirm this in a legally binding document called a ‘Trust Deed’.
Trustees are the legal owners of any assets that are held in a Trust, and have to deal with them according to what the Settlor has written in their Trust Deed or Will. Trustees also have the responsibility to pay any tax due from the Trust. There can be multiple Trustees, but there must always be at least one.
Beneficiaries can benefit from either the income from a Trust, the capital from a Trust, or both. The income might be rent from a property included as an asset in the Trust, and the capital might be a share in the value of a Trust when they reach a certain age. There can be multiple beneficiaries included in a Trust.
If you’re interested in setting up a Trust and need advice, we can help. We will support you from the get-go, helping you establish what type of Trust is suitable and advising on what you should place in the Trust. Setting up a Trust doesn’t have to be difficult, and we can make sure that it’s not.
What kind of Trusts are there?
There are a range of different types of Trusts, each one with different requirements, restrictions and tax rules. Establishing what type of Trust fund to set up can be a confusing process, but luckily we are here to help you choose what type of Trust is best for you and your family.
We can help you choose a Trust type and will support you in setting it up. We’re on hand to answer all questions you may have to make sure you feel complete confidence.
The seven main Trust types are:
This is where the assets are held in the name of a Trustee, but the beneficiary has the right to all capital and income at any time once they are over 18. You might use this type of Trust fund to pass assets onto your children or grandchildren.
Our team of experts have years of experience setting up and managing bare Trusts, and are here to help you too.
Interest in possession Trusts
This is where the Trustee has to pass on all income from the Trust to the beneficiary as it is earned. You might opt for this type of Trust if you want someone to benefit from the earnings from assets, such as rent from a property, but do not want to give them the assets themselves.
Our Trust solicitors can advise you on, and then help you set up and manage your interest in possession Trust.
This is where the Trustees are entitled to make certain decisions about how Trust income is used. Depending on what you write into the Trust Deed, you might enable your Trustees to decide what gets paid out, how often payments are made, and any conditions of payment to your beneficiaries.
You might use this type of trust if you want to put money aside for the future needs of beneficiaries who are unable to deal with assets themselves.
Our knowledge and expertise in setting up and managing discretionary Trusts means we are ready to help you with yours.
With an accumulation Trust your Trustees can gather income within the Trust to increase its capital value. Like with discretionary Trusts, your Trustees may also be able to pay income out if you have it written into the Trust deed.
We have plenty of experience setting up accumulation Trusts for clients, and can help you to do the same.
A mixed Trust is a combination of more than one type of Trust. Different parts of the overall Trust will be treated according to that specific type of Trust’s tax rules.
You might choose a mixed Trust if you have a range of beneficiaries with different needs, in which case one Trust type will not suit everyone.
We understand when a mixed Trust may be more suitable for you, and are on hand to advise and guide you.
A settlor-interested Trust is where you or your spouse or civil partner will directly benefit from the Trust. It could be an interest in possession Trust, an accumulation Trust or a discretionary Trust.
You might choose this type of Trust if you want to put aside money for yourself and your partner in the future. People who have their working lives cut short due to illness would greatly benefit from this type of Trust.
Our specialist team has years of experience helping clients set up settlor-interested Trusts, and are here to help and support you too.
This type of Trust is set up where the Trustees are not residents of the UK. These types of Trusts can be very complicated due to the tax rules that apply, but they are possible to set up.
We can help you set up the best Trust fund for you and your family, no matter how complex the process will be.
How to set up a Trust fund
If you want to set up a Trust, no matter which type you are interested in, you need to get an experienced Trust solicitor to help you. Without legal help, the Trust may not be set up correctly, which can end up costing you and your family a lot of time and money later down the line.
We can help you establish what Trust type suits your needs best, and will work with you to set it up. We make sure that the Trust is watertight so you can be confident that it functions in the way you want it to. The basic process of setting up a Trust with us is as follows:
- We will meet with you to establish how you wish your Trust to operate, and will recommend what type of Trust is best for you
- We will then produce your trust deed in accordance with your instructions, ensuring the legal wording is very precise
- You will have to approve and sign every piece of important documentation throughout the process, as after all, they all concern your assets and possessions
Trusts are a good way to legally protect and manage your assets, so the best and most secure way to set up a Trust is through a legal professional who can help you fully understand how to set up a Trust fund and work with you to do so.
We want to make the process of setting up your Trust as simple as possible for you, so will support you whenever you need us to. With our help and guidance, you can rest assured that your Trust fund fits in with what suits you.
Setting up a family Trust
Setting up a family Trust is a good idea if you want to protect your assets and keep them belonging to your family after you pass away. You can set up a family Trust if you are in a marriage or civil partnership, whether you have children or not. We are here to help and support you if you would like to set up a family Trust.
There is no one set family Trust, but instead you have the opportunity to set up one of the following types:
- Bare Trust
- Interest in possession Trust
- Discretionary Trust
The type of family Trust you opt for will depend on your circumstances, who you want to benefit and how you want them to benefit.
Our expert Trusts team want to help you do what’s best for you and your family in the long run. We can help you decide what type of Trust will benefit you all most, and then proceed to set up the Trust.
We always make sure that our clients have a great understanding of the Trust they set up, so you can rest assured that your family Trust is in safe hands with us.
Setting up a Trust for a child
Parents or grandparents can set up Trust funds for children who are under the age of 18. The child must have never been married or in a civil partnership in order to benefit from the Trust. If you want to set up a Trust fund for a child, our solicitors are here to help.
Like with family Trusts, there’s not one type of Trust specifically for children. Instead, the Trust you set up for a child will be one of the below types:
- Bare Trust
- Interest in possession Trust
- Accumulation Trust
- Discretionary Trust
If you have children and/or grandchildren and you want to ensure that they are financially stable after you have passed, we can help you through the process of setting up a Trust for a child.
We know that every family has its different needs, so always make sure that we take the time to get to know you so we can carry out your wishes in the way that’s best for you.
Setting up a Trust fund to avoid Inheritance Tax
Inheritance Tax is a type of tax that your family may have to pay on your estate after you pass away. Inheritance Tax is due at 40 percent of any estate worth over £325,000.
Many people think that setting up a Trust fund is a good way to avoid your family having to pay Inheritance Tax, and although this can be true, it isn’t the sole benefit.
However, there are some instances in which a Trust may be beneficial for saving or avoiding Inheritance Tax. For example, if you set up a bare Trust and survive after transferring your assets into the Trust by more than seven years, the transfers could be exempt from being taxed. Or, if a Trust is set up for a child under the age of 18 who has lost at least one parent or step-parent, there may also be no Inheritance Tax charges.
It is not advisable to simply set up a Trust to avoid Inheritance Tax, because in reality exemptions will only apply to Trusts where the beneficiaries would be severely worse off by paying the tax.
We can help you to understand how Inheritance Tax would work for you and your family, and help you to set up the Trust fund that benefits you all the most once you have all the information you need.
How AWH can help you
Here at AWH our Trusts service is focussed on precision and ensuring that our clients’ needs and wants are met. We make certain that our clients are fully aware of the actions they are taking throughout the process of setting up their Trust, such as choosing their Trustees and beneficiaries.
We know that understanding the different types of Trusts and how they operate can be very confusing which is why we’re here to help. Our expert Trust solicitors can explain the process to you clearly and concisely, making sure that you have all the information you need.
Whatever Trust service you need, whether you need advice on what Trust to choose, or know what you want and would like to make it a reality, we’ve got you covered. We’ll support you from day one, and will always be here to answer your questions and put your worries to rest.
- What is a Trust fund and how does it work?
A Trust fund is a way for people to manage and protect their money, property, land and investments. There are seven main types of Trust funds, all with their own rules, requirements and benefits.
Within a Trust there are three roles: the Settlor, the Trustees and the Beneficiaries. These three roles have different functions depending on what type of trust fund they are in. Their functions will usually be written into a legally binding document called the 'Trust Deed'.
- How do you set up a Trust fund?
You set up a Trust fund by employing the services of an experienced Trusts solicitor. Trusts cannot be legally binding unless they are set up and overseen by a legal professional.
The terms of a Trust fund usually needs to be confirmed in writing in a 'Trust Deed', which will detail who your trustees and beneficiaries are as well as their roles and responsibilities in regards to the Trust.
- How do Trust funds pay out?
For most Trusts to pay out, the settlor or trustees must give their permission for the money or other assets to be released to the beneficiaries.
However, Trust funds pay out in different ways depending on what type of Trust it is and what the terms written into the 'Trust Deed' are. For example, some Trust funds, specifically those set up for children, will only pay out once the child reaches 18.
- How do I dissolve a Trust?
How you dissolve a Trust depends on what type of trust you have set up in the first place. In any dissolution, all assets within the Trust must be distributed according to the terms that are set out in the 'Trust Deed'.
HMRC also need to be notified that the trust is being dissolved in order for the process to become complete.
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- Contact us Get in touch however suits you best and arrange a consulation with one of our solicitors
- Meet an expert You’ll meet the expert solicitor assigned to your case and discuss all the necessary details
- Authorise Once we’ve got all the details of your case and you’re happy to proceed, just give us the go-ahead
- We get to work It’s time for us to get to work! We’ll set up your file on our system and get to work right away
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