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what is a trust?

A trust is a legally enforceable arrangement, set up either in your lifetime or on your death (normally) by a written Trust Deed.

On creation of a lifetime Trust you hand over some of your assets (eg money or property) to be looked after by someone else, known as a trustee, for the benefit of another person or persons, known as the beneficiaries.

Once you hand over the assets you cannot benefit from them again unless you have nominated yourself to do so under the terms of the Trust deed. There are tax implications connected with being a beneficiary of your own Trust.

A Trust arising on death does not come into effect until you die. It will either arise under the terms of your Will, but can arise under the Intestacy Rules (where there is no Will) and any of the beneficiaries entitled to benefit are under 18 or come within the special rules applicable to a spouse.

A written Trust Deed (either created in your lifetime or under your Will) allows you to specify how you want the trust to be administered. For instance you can say when beneficiaries are entitled to the assets in trust. Many people leave money in trust for children, and nominate them to receive it once they reach a certain age.

There are many different types of trust. There are also tax and other issues arising from the Finance Act 2006 which you need to carefully consider before deciding whether a trust is right for your circumstances.

Sue Cash can advise you on the most appropriate type of trust to set up to meet your needs.

Reasons to set up a trust

Common reasons for setting up a trust are:

  • to reduce inheritance tax for your family or to reduce your own tax burden
  • to pass assets on your death without the need for a Grant of Probate
  • to take care of assets for the benefit of children, or to pay for their school fees or education
  • to shield assets for the benefit of another who is too disabled, sick or old to look after them personally, or who may be in local authority funded care