A trust is a legal arrangement where one or more people or a company (called the trustees) controls money or assets (called the trust property) which they must use for the benefit of one or more people (the beneficiaries).
Imagine you asked a friend to look after some of your money, so they could use it to pay for your care if you got ill. If you just gave them the money straight out you couldn’t be sure that they’d use it properly. They could spend it on whatever they liked. So, instead, you can set up a trust. With a trust, the money has to be used according to rules you set out.
In the example above, your friend would be the trustee, your money would be the trust property, and you’d be the beneficiary – the person who benefits from the trust.
You can put money, investments or other assets into the trust. Depending on the type of trust you use, it may have to pay tax and the trustees may need to complete tax returns.
Trusts have been used by families for almost 1,000 years and give control, protection and flexibility.
You might set up a trust:
For example, a trust can be useful if you have a child with a mental health condition or learning disability and you’re worried about how they’ll manage financially after you die.
Trusts can also help someone who has received compensation following a personal injury claim. If the compensation is held in a trust, it can be used to pay for therapy or other things the injured person needs without affecting their entitlement to means tested benefits.
Trusts are also often set up to help children, grandchildren or other close relatives. For example, you might want to set money aside to help a niece with her future university expenses but not with funding a holiday in Ibiza. A trust is the ideal way to specify this.
There are various categories depending on how the income or benefit (dividends, interest, rents, free use of property and so on) is to be dealt with.
This list is not exhaustive – there is also the protective trust, the marriage settlement and the bare trust.
The legal wording of a trust needs to be precise and setting one up can be expensive although some charities have schemes where they contribute towards, for example, the parents’ costs of setting up a trust for a disabled child.
You need to choose people you know you can rely on to be your trustees. These will usually be family members or close friends but could also be professional trustees such as your solicitor and/ or accountant. Think carefully about whom to ask and make sure that they are happy to take on the responsibility, which can last for a number of years. Professional trustees will charge for their services but will have relevant expertise and can act impartially. You should have at least two trustees but probably no more than three or four.
For further information please contact:
Mary Harty is our Trust expert and can be contacted on 01179 292811.
Wards Solicitors LLP are working and available for existing cases as well as for new business and new clients. Our eleven branches remain closed to the public but our lawyers are still working away to ensure that we continue to provide excellent client service. While we are currently unable to offer face to face client meetings, this is under regular review. Our prime concern is the safety of our clients and our staff.
It may take a little longer than usual for our phones to be answered so please bear with us.
We look forward to hearing from you.
Wards Solicitors LLP