Trusts have been used by families for centuries to protect wealth.
A trust is a formal transfer of assets (whether they be property, shares or just cash) to a small group of people (usually two or three) known as ‘Trustees’ with instructions that they hold the assets for the benefit of others. If the trust is to be made in your lifetime to take immediate effect, then it is usually evidenced by a trust deed and often referred to as a ‘settlement’. If it is to be created on or shortly after your death then the trust rules must be set out in your Will.
Whether by lifetime settlement or by Will, the trust instrument will state who is responsible for looking after the gifted assets (the Trustees), who is to benefit (the Beneficiaries) and any conditions or rules that the Trustees or Beneficiaries must adhere to. The separation of the legal ownership and beneficial ownership (which were once inseparable) is the unique characteristic of the trust concept. The Trustees are the legal owners but the beneficial owners are the Beneficiaries.
How long a trust lasts is entirely as you think appropriate but the trust period must be stated in the trust document. It might be for just a few years, perhaps during a person’s widowhood or until a child attains a certain age or marries. Trusts can last much longer however – up to 125 years. It is usually advisable to give the Trustees the power to terminate the trust at their discretion.
If you are creating the settlement in your lifetime you can appoint yourself and your spouse as Trustees if you wish so that you remain in control of the assets and the decision making.
What does being a Trustee involve?
Because trust funds do not belong to the Trustees personally, as they are holding the funds for the beneficiaries, the law places heavy duties and a high standard of care upon Trustees.
In many ways the duties on Trustees are onerous and a lay person should give careful consideration to accepting an appointment as a Trustee. Unless they are a professional trustee they will not usually be able to charge for their time.
- We can help with the ongoing administration of trusts, including preparing annual accounts and completing the yearly income tax return as well as the 10 year anniversary return;
- We can put you in touch with independent financial advisors with experience of advising on trust investments;
- We can advise Trustees on their powers and duties under the trust instrument or under statute;