A trust is a legal arrangement in which an individual (the settlor) gives legal control of property to a person (the Trustee), to hold the property for the benefit of specific beneficiaries. A trust can hold assets – such as land, money, shares or even antiques – for the benefit of one or more ‘beneficiaries’.
Trustees are the legal owners of trusts. Trustees act in accordance with the terms of the trust. These are set out by the person who has put assets into the trust. This person is known as the ‘settlor’
Why have a Trust?
Trusts may be set up for a number of reasons, for example:
- to control and protect family assets
- when someone is too young to handle their affairs
- when someone can’t handle their affairs because they are incapacitated
- to pass on money or property while you are still alive
- to pass on money or assets when you die under the terms of your will – known as a ‘will trust’
- under the rules of inheritance that apply when someone dies without leaving a valid will (England and Wales only)
There are several types of UK family trusts and each type of trust may be taxed differently.
There are other types of ‘non-family’ trusts. These are set up for many reasons. For example, to operate as a charity, or to provide a means for employers to create a pension scheme for their staff.
A trust, if appropriate, can reduce the value of your estate now and therefore at your death. The impact is to reduce the requirement to pay IHT on your estate.
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