Trusts
A trust separates who owns something in name from who benefits from it, on terms someone else has set. That separation is useful in a handful of situations, and unnecessary in most others.
What a trust is
A trust exists whenever one person, the trustee, holds property for the benefit of someone else, the beneficiary, on terms a third person has set out.
A parent writing a will might leave money to their eight-year-old child, but say that a trustee is to hold it until the child turns 25 rather than the child receiving it the day they turn 18. The trustee owns the money in name and controls it in the meantime. The child has the benefit of it, on the terms the will sets.
When one is worth having
A trust is usually worth having where straightforward inheritance is not:
- Provision for a child who is too young to manage an inheritance outright.
- Provision for a beneficiary who receives means-tested support, where an outright inheritance could affect what they are entitled to.
- Protecting an interest in a home, for example where a second marriage means you want a partner to be able to live there for their lifetime while the property ultimately passes to your children.
- Provision that has to last beyond one generation rather than end at the first.
What trustees have to do
A trustee has to act in the interests of the beneficiaries, follow the terms of the trust, keep trust property separate from their own, keep proper records, and invest trust money sensibly rather than as they would their own savings.
A trustee who gets this wrong can be personally liable to make good any loss to the trust, whether or not the mistake was deliberate. Anyone asked to act as a trustee should understand this before agreeing.
Trusts created by a will
Many trusts begin in a will rather than as a separate deed signed during someone’s lifetime. A will can create a trust for children, for a partner’s lifetime use of a property, or for a beneficiary who needs one, without a second document ever being drawn up.
What we do
We draft trusts, whether inside a will or as a standalone arrangement, advise on trusts that already exist, and act for trustees who need to know whether a step they are considering is within their powers before they take it.
Questions people ask
Sometimes, and only partly. Certain trusts change how and when inheritance tax falls due, and can reduce it in the right circumstances, but a trust is not a way to avoid tax altogether, and tax should not be the only reason for setting one up. Many worthwhile trusts have no tax advantage at all — the point is protecting a beneficiary or an asset, not the tax position.
You can be one of several trustees and also a beneficiary — a surviving partner given the right to live in a house for their lifetime, while also acting as one of the trustees, is a common arrangement. What does not generally work is being the sole trustee and the sole beneficiary of the same trust, because the two roles would simply merge.
Running a trust involves ongoing costs — tax returns, accounts, and legal advice whenever a decision needs it. How much depends on what the trust holds and how often something needs deciding. We can give you figures for your situation once we know what the trust involves.
Often, yes. Some trusts end naturally when a beneficiary reaches the age set for them to inherit outright. Others can be brought to an end early if all the beneficiaries are adults, have full capacity, and agree, or if the trustees hold a power that lets them do so. Some are designed to run for a fixed term and end on their own.
Ready to start?
Send an enquiry and we will tell you what it costs before any work begins.