A Trust can be a tax-efficient way of benefiting someone in the future – for example, money passing to a relative on their eighteenth birthday; an allowance paid every month to a grandchild; a valuable possession held for safekeeping. Trusts can be arranged to deal with a vast range of circumstances, but their success depends on careful preparation.
What is a Trust?
In simple terms, it’s a legal arrangement where you can give an asset, which can be property, money, shares etc. to someone- a ‘trustee’ to look after for another person the ‘beneficiary’.
The trustee technically owns the assets and will manage the trust for the beneficiary, who will receive the asset at a given time.
Different Types of Trusts
Now this can get complicated and you should seek legal advice when setting up a trust, as there are several types of trust, and it will come down to what’s best for tax and fits the purpose.
The basic trusts are
– Interest in possession trust – the beneficiary can receive an income from the asset but not the asset itself. An easy example of this is the trust is set up with a partner as the beneficiary, say it’s a rented property, the beneficiary can receive the income from the property but when they die it will pass to a specified recipient, children for example.
– A Bare Trust – straight forward – gives everything to the beneficiary (if over 18)
– Mixed Trust – bit of a mix and match – part of the trust is like the, ‘Interest in possession trust’ but some of the assets are treated under the rules of a different trust.
– Discretionary trust – this gives the power to the trustees to decide how the assets are distributed, and investment decisions within the trust.
– Vulnerable Persons Trust – this may be of tax benefit if the beneficiary is a ‘vulnerable person’.
There is a myriad of considerations when setting up a trust, most are set up very easily, some may be subject to legislation changes, or allowance changes, or may be the structure of a Will, call Biceser Wills & Probate on 01869 226760 or email firstname.lastname@example.org to discuss your individual needs.
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