Most people know very little about trusts and very often they are perceived to be either some form of dodgy tax-saving device or an outdated legal concept.
However trusts can be very useful tool in protecting assets (for instance against potential claims on divorce or financial meltdown or the like). They also provide a useful way of holding onto assets for people who cannot look after such assets themselves e.g. because they are too young or because they do not have the mental ability to make their own decisions and to manage their own finances.
Unfortunately, it is not only the general public who do not understand trusts. Unfortunately there are many professionals who dabble with them, not fully understanding what they are doing or the risks involved. Here are a few examples:-
1. People will set up trusts over their homes, believing that this will protect them against having to pay local authority care charges. They do not realise that this may not work, it can have inheritance tax consequences and can mean having to prepare inheritance tax paperwork on death which would not otherwise be required.
2. Flexible trusts put into Wills for good inheritance tax saving motives are often ignored altogether or not properly dealt with when it comes to the time of implementing the trust arrangements, creating potential problems for the future, particularly with the Revenue.
3. Trusts are not run properly. The Trustees never (or hardly ever) meet and their decisions and actions are not recorded in writing, putting the trust at risk of being regarded by the Revenue or by claimants as a sham, so that the trust can be ignored.
When used properly, trusts can be very useful, particularly in protecting assets and planning for the future. If, on the other hand, they are used by people who do not really understand them, they can be dangerous and lead to problems in the future.
If you wish to find out more about making a trust or reviewing an existing one, make sure you take proper professional advice. You should consult someone who has in-depth specific knowledge about trusts and this is likely to mean that at very least they should be a member of the Society of Trust and Estate Practitioners and that they can demonstrate a detailed knowledge of the subject. Adam Bruce here at UTK has been a member of STEP for over twenty years (he is currently the Chair of the Wales Branch) and has been working as a solicitor with trusts for over thirty years. Please contact us on 01267-237441 (selecting option 2) if you would like to meet with Adam to discuss an existing or a new trust. We can offer a free 30 minute consultation for general advice on trusts. Please also contact us if you would like to have a copy of the STEP booklet on making trusts.