Putting it simply, a trust is where someone transfers assets to one or more persons (the trustees) to be held on behalf of named individuals or groups of individuals (the beneficiaries).
We may come across trusts in our lives, possibly directly or simply because they are in the news as they have been recently with the press interest in offshore trusts.
So why have a trust?
There are a whole range of situations in which trusts are used without many of us realising it. One example is that most company pension schemes are structured as trusts and a lot of life insurance arrangements rely on a trust sitting alongside. Many charities are run as trusts.
On a more down-to-earth level, people use trusts in their lifetime or in their Wills where it is felt necessary not to give assets directly to those who are intended to benefit from them (the beneficiaries), but instead for someone to manage or control the use of those assets for the benefit of those persons. This could be because the person who is to benefit is unable to look after the assets for themselves (for instance if they are too young or they lack enough mental ability) or if there could be a claim on those assets if they are owned by the person directly (for instance in divorce or bankruptcy).
Is there no tax-saving element to trusts?
There are still tax savings to be made from trusts but these have been much reduced in recent times. Trusts tend only to be used for tax-saving in certain specific situations such as in making careful use of inheritance tax allowances in a Will or in a person’s lifetime and in planning through life insurance.
Should I be considering setting up a Trust?
Adam Bruce has specialised in trusts for nearly 30 years and is currently the Chair of the Wales Branch of the Society of Trust and Estate Practitioners, the leading professional body in this field. Adam regularly sets up, administers and terminates trusts. For further information on how trusts work or in relation to a specific trust matter, please contact him by emailing firstname.lastname@example.org or telephone 01267-237441