Thinking of setting up a trust?
Setting up a Trust
We are perhaps more familiar with how to go about giving our property and possessions when we die (a will) than we are with the process of disposing of our assets in our life time.
We may decide to give away property or possessions in the form of a gift, or we may wish to retain some control over the way these assets are distributed.
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We can retain some control over this by setting up a trust. We might want to do this for other reasons too, such as the people we wish to give the assets to are too young to legally receive them or for inheritance tax management.
It is important to know the parties that are involved in a trust.
- The Settlor- this is the person that wants to set up the trust and has put the assets in.
- The Trustee- this is the person that will carry out the wishes of the settlor in regards to the trust.
- The Beneficiary- this is the person that will benefit from the trust and receive the assets.
Which kind of trust do I need?
These are some of the types of trusts that exist and their purpose.
Bare Trust: If your aim is to set up a trust to give assets to a person after they turn 18, a bare trust may be suitable. This means that although the assets are held in the name of the trustee (as with all trusts), the beneficiary has the right to all income and capital from the trust, once they turn 18.
Discretionary Trust: In this type of trust, the trustee has more responsibility in terms of how the trust assets are distributed. This may include the frequency of payments, amount paid out and to whom. The trustee may be able to decide whether capital (the lump sum) or income from the capital (investments etc) are paid out.
What would you do next?
The wording of trust documents must be very precise in order to convey your wishes, and therefore it is very important to obtain the services of an experienced trust solicitor.
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