Trusts Solicitors

What is a trust? 

A trust is an arrangement whereby assets are placed in trust for the benefit of trust beneficiaries pursuant to a legally binding agreement governed by a trust deed or trust instrument. In most cases the basic reason for setting up a private trust is to provide for loved ones who because of their age, mental incapacity or other circumstances, may not be able to properly look after assets themselves. 

In order to set up a trust, a person (called the Grantor or Settlor) transfers money or property to the nominated trustees who are then responsible for supervising, holding, managing or distributing the asset.

The Trustees then handle the money or property as directed by the Grantor for the benefit of certain people (called Beneficiaries). A trust is a separate legal instrument that can be created during a person’s lifetime or through a testamentary document such as a Will.

What are the different types of trust? 

Although trusts are typically thought of as belonging to the affluent, they are actually quite flexible and can be utilised to accomplish a variety of goals. 

Trusts can also be created for tax-planning reasons and asset protection. The most usual types of trusts which can be created are:

Bare Trust

This type of trust is not, strictly speaking, a trust at all. An asset is held in the names of trustees, but the trustees only nominally own the assets within the trust. The real owners are the beneficiaries. Such trusts arise commonly when children are entitled to assets but they are not old enough to have legal authority to deal with those assets.

Discretionary Trusts

The trustees of a discretionary trust own the trust assets having absolute discretion to administer and distribute the assets, and these powers apply to both capital and income of the trust. 

The beneficiaries only have a mere ‘hope’ of receiving a benefit from the discretionary trust. The trustees are often guided by a separate non-binding letter of wishes created by the ‘Settlor’ of the Trust as to how they would like the trustees to exercise their discretion.

The Settlor can also be a trustee but for tax purposes should never benefit from the trust assets themselves in any way. The real advantage of this type of trust is in its flexibility allowing the trustees to take into account the changing needs of the beneficiaries and the tax legislation throughout the trust period.

Mixed Trusts 

A combination of different trust kinds is called a mixed trust. A discretionary trust may be used to handle some of the assets in the mixed trust, while other assets may be put away as an interest in possession trust. Sibling beneficiaries who reach the age of majority at different periods may benefit from these trusts.

Interest in Possession

This is a trust whereby a person (called the ‘life tenant’) is entitled to income or occupation of a property but not to the capital. Such a trust may be established in the circumstances of second marriages where the settlor wishes to provide for a new partner while at the same time protecting capital for their own children to inherit in due course.

Why do I need a trust? 

With the help of trusts, someone can prescribe, or leave behind, assets while maintaining some degree of control over how those assets are utilised and managed for the benefit of the beneficiaries.

Utilising trusts proves invaluable in handling estate affairs, strategising for inheritance tax arrangements, and securing assets for successive generations. 

The realm of trust law is intricate, offering an array of trust variants, necessitating meticulous selection of the suitable trust type and trustees. 

Furthermore, the sustained management of trusts poses significant challenges and consumes substantial amounts of time, which emphasises the significance of involving experienced solicitors in the creation and maintenance of trusts.

How can our experienced solicitors help? 

Our knowledgeable team of solicitors is skilled in handling the nuances of trusts and can offer professional advice catered to your particular situation. Merriman Solicitors is here to help you at every stage of the process, regardless of whether you’re thinking of creating an interest-in-possession trust, a discretionary trust, or a combination of the two.

Please fill out our contact form or call us at 01672 515846 for assistance. Allow us to assist you in properly planning for the future and protecting your assets.