Drafting a Trust as part of your estate planning can be a tax-efficient way to divide and protect your assets for your beneficiaries, especially if they are too young to make financial decisions.
Generally we recommend, if you’ve inherited a large section of land or property, or have purchased one that you’d like to pass onto your family in the event of your death a Trust can be a smart and efficient option to ensure your wishes are carried out.
Due to the complex laws surrounding Trusts, they can become complicated. We won’t be able to delve into all of the specifics of Trusts, but we hope this will give you a better understanding of what Trusts are and how they work.
What are Trusts?
A Will Trust, or a testamentary trust, is a provision within your Will to allow you to protect your assets through named Trustees, then at a time or event specified in the Trust assets can then be passed onto the named Beneficiaries.
Trusts, in a nutshell, are a legal way for one or more people to benefit from an asset without being the named legal owner.
In a Trust, the people who look after the property stated in the Trust for the benefit of others, are called Trustees.
The Beneficiaries in a Trust are those who will benefit from the property, assets, or investments passed into the Trust.
What are the duties of Trustees?
As is the case with all Trusts, the Trustees owe a legal duty to the Trust’s Beneficiaries to manage and act in the Beneficiaries’ best interests at all times.
This means they must be dedicated, trustworthy, financially stable, and have decent administrative skills to continually maintain the property held in Trust.
If you’ve been named a Trustee in a Will, it’s likely you’ll often need the support and advice of legal experts to ensure your duties and responsibilities are carried out correctly.
How can a Trust protect my assets?
A Trust can protect your property and assets in a number of ways depending on the type of Trust.
In England and Wales, there are numerous main types of Trusts which impact the Trustees responsibilities, duties, and interests and also how the Beneficiaries may receive the capital or income.
The most common types of Trusts are:
Bare Trust – Assets held in name of Trustees — Beneficiary can claim capital and income at age of 18 in England and Wales
Interest in Possession Trust – The Trustees must pass on all Trust income to the Beneficiary as it comes in
Discretionary Trusts – Where the Trustees are empowered to make specific spending decisions at their behest for the benefit of anyone listed as a beneficiary
Mixed Trusts – Simply a combination of one or more type of Trust
At Farleys, we have experience handling and drafting a range of Trusts some with overseas assets. We can help guide you through the Estate Planning process and help you decide if a Trust is the best way to protect your assets!
What’s the difference between a Will and a Trust?
We’re often asked about the differences between a Will and a Trust. There’s a few things we’d like to point out.
First, a Trust can be part of a Will but a Will cannot be part of a Trust.
Second, a Trust may not always give the Beneficiary a large lump sum all at once. Some Trusts do, but not all. Generally, in a Will all of the assets are pooled and then divided among the Beneficiaries for them to use as they see fit.
This brings us to the third point, a Trust, may come with specific instructions, conditions, or duties for both the Beneficiary and the Trustees. A Beneficiary, may for example need to be a specific age or meet other terms and conditions in order to receive the assets held in Trust.
And Trustees may need to make sure the management of the assets is always done with the Beneficiary in mind. Plus, they’ll need to make sure they meet the exact instructions specified in the Trust to ensure their duties as a Trustee have been carried out.
Being a Trustee is a big responsibility — that’s why when setting up a Trust we recommend our clients think it over and select the best candidate.
Trusts in England & Wales can be a complicated and time consuming process, even more so once you add in the Tax Law side of it. But, as part of our Estate Planning service, we’ll walk you through the best course of action for your specific situation. You’ll be able to ask any questions we’ve not been able to answer here.
Contact a Trust & Estate Planning Solicitor
Farleys Solicitors LLP are a friendly, trusted, and straight talking local firm with over 50 years of experience serving clients all over the North West. Our experience staff can answer all of your lingering questions regarding Trusts and Estate Planning.
Farleys aim to provide the best service for our clients and can write your Last Will and Testament and any a Trust specific to your needs, situation, and assets in addition to advising you on Inheritance Tax — so you can make an informed decision about what you leave behind.
If you think you need to speak with one of our specialist Solicitors about any of our services please give us a call on 0845 050 1958, by our online chat, or email. We’re here to help!