Types of Trust.
A trust is a device where assets can be placed. They are no longer the property of the settlor, but they are owned by the trust the trust is controlled by the trustees one who could be the settlor.
Similar to forming a limited company example you may drive a car owned by your company but technically you do not own the car but you own the company and the car is an asset of your company.
If you were to become bankrupt and had to list your assets if your house was in trust it would not be counted as part of your assets but as the trustee you still have full control.
If you divorced what is in the trust is not part of your assets.
The same with care home fees.
Often overlooked is Personal injury payments for example you have a injury and received a sizable payment as soon as the money reaches your bank account you no longer qualify for any of the means tested benefits, by placing it in a trust you do not own it but as trustee you can control the trust so if you needed a new car the trust would buy the car.
There are two principal types of trust Pilot Trust and Will Trust.
Will trust are trust within the Will they only become active on death.
Pilot Trust are free standing trust that allow assets to be placed in them at anytime.
There are two versions discretionary and absolute trust.
A discretionary trust gives the trustees discretion. Absolute trust gives them no discretion.
Example you leave assets in trust to pass to your child at the age of 25 but that child is about to get divorced with a 25 birthday just before the divorce. If the trust was absolute the payment would have to be made on that date even though 50% could be lost via the divorce. If it was a discretionary trust the trustees could decide that it was in the child’s best interest to delay payment until after the divorce was absolute. We usually advise that it advisable to have discretionary trust. Remember the trustees will be trusted people appointed by you.
We also have Will Trust.
Right to occupy.
Frequently Asked Questions
A list of the most frequently asked questions by persons considering setting up a Trust is set out below.
1. What is a Settlor?
A Settlor is the person or persons who establish or set up the Trust.
2. Can the Settlor also be a Beneficiary?
Yes it is possible and indeed common for the Settlor or Settlors to also be Beneficiaries.
3. What assets can be placed in the Trust?
Almost any type of asset that can be owned individually can also be owned included.
4. What type of Trust do I need?
This will depend on your individual circumstances and will be determined after taking suitable legal and tax advice. In most cases, however, the Discretionary Trust is the most widely used and flexible Trust available.
5. What is a Discretionary Trust?
A Discretionary Trust is a wide ranging and flexible document which can hold most types of assets. It gives wide ranging administration powers to the Trustee, which enables flexibility to meet the needs of the Beneficiaries.
6. Can I keep control of the assets?
Once assets have been placed into a Trust, they are under the administrative control of the Trustee and the Settlor has no legal ownership or control of the assets.as a individual but could be the trustee.
7. How can I influence what happens in the Trust?
At the time of establishment of the Trust, the Settlor will indicate to the Trustee what the purpose of establishing the Trust is and who are intended to be the Beneficiaries. This will be recorded by the Trustee who will have regard to it in administering the Trust. In addition, the Settlor is invited to submit a letter or memorandum of wishes from time to time which may record any of the Settlor’s ongoing wishes for the administration of the Trust. Whilst this is not a legally binding document, the Trustee will naturally have regard to it in the consideration of its Trustee powers and in the exercise of its discretion under the terms of the Trust Deed.
8. Who will be the Trustee?
Any person over 18. This could be a relative, friend or organisation. YOU CAN ALSO BE A TRUSTEE.
10. Can anyone be a Settlor?
Yes, anybody who is over the age of 18 so long as they are not an undischarged bankrupt may be a Settlor. Anybody who is an undischarged bankrupt may not be a Settlor.
11. Can a Trust help my personal tax position?
In many cases, a Trust can be used to improve a personal or family tax situation. This will, however, depend upon the individual circumstances of the Settlor and Beneficiaries and it is important that legal and tax advice is taken prior to the establishment of a Trust to ensure that best advantage is taken of any tax planning opportunities.
12. What happens after I die?
The Trustee will continue to administer the Trust in the best interests of the Beneficiaries. In doing so, they will consider the terms of the Trust and any discussions held with the Settlor before their death as well as any wishes left by the Settlor to indicate how they envisaged the Trust to be administered. The Trustee will, however, consider the ongoing needs of all Beneficiaries prior to the exercise of its discretion.
14. What happens if I change my mind or the family circumstances change?
During their lifetime, a Settlor can indicate to a Trustee either during a meeting or through a letter to the Trustees any change in the family circumstances that the Trustee would need to consider when administering the Trust. Such changes may take the form of providing additional benefit for a child who has special needs and requires greater benefit from the Trust or perhaps that the Trust be terminated if ongoing tax or legal advice indicates that it would be in the interest of the Beneficiaries.