Trusts

Trusts are used to look after assets for the benefit eventual of specific beneficiaries. The person creating the Trust is called the Settlor. A Trust appoints Trustees to manage any assets owned by the Trust in a way set out in the Trust documents, though generally Trustees may act at their discretion, as long as it is in the best interests of the beneficiaries.

There are several advantages to using Trusts:
1. Assets held by Discretionary Trust are protected against reckless beneficiaries e.g. divorce, bankruptcy, etc.
2. Assets owned by the Trust are no longer owned by the Settlor. This has been used in the past to mitigate Inheritance tax though new proposed laws may reduce their effectiveness
3. The Settlor (the person or persons creating the Trust) can lay down rules about how the Trust fund can be used and when. Most commonly only after the death of the Settlor.

Trusts are complex documents and there are many factors to consider. We STRONGLY advise seeking professional advice before using them.

Mrs Anne Body is divorced with a grown up son. However her son, Adam, is physically disabled and requires considerable help with day to day life. Anne is worried that she won’t be able to look after him the future and is very worried about his future when she is gone.

The solution is a Trust.

Anne creates a Trust for her son Adam. She starts it with a few £1000’s she has in the bank and plans to make regular deposits over the years. She also makes a new Will that gives all her assets on her death to the Trust.

She appoints herself and her brother as Trustees of the Trust and names the main beneficiary as her disables son Adam, but also has she nieces and nephews as other possible beneficiaries, just in case.

A Trust set up this way would be classed as a Disabled Person’s Trust and any assets owned by the Trust would be IHT free. It would also not affect Adam’s rights to claim state benefits and support. As a full discretionary Trust Anne has given the Trustees full control over how and when any money is used for Adam’s benefit.