Why should you make a trust?
Trusts can be used in order to avoid or address problems, they allow for control of assets by nominated trustees. They are viable for both personal and commercial uses. The two main areas trusts are used for are domestic matters and taxation.
You may plan to leave money to your children but are worried they are too young to handle the assets. Alternatively you could worry about them losing the assets in divorce. By using a trust you can protect those assets. A trust also allows for privacy, where a will is public a trust can be kept private.
A trust can allow you to pass assets, without the need to pay a high rate of inheritance tax in the event of your death. There are measures you can put into place to limit the amount of tax you or your children will have to pay. This is dependent on the trust type and your circumstances.
HMRC set out the following reasons for creation of a trust:
- To control and protect family assets
- When someone is too young to handle their affairs
- When someone can’t handle their affairs because they are incapacitated
- To pass on money or property while you are still alive
- To pass on money or property under the terms of your will
When making a trust the asset owner known as the ‘settlor’ will express their intentions to create the trust. It can be a legal document known as a trust deed or in some cases an oral declaration. There must be three certainties when making a trust:
- The expressed intention to create a trust
- Stating the subject matter and the proposed assets
- The beneficiaries of the trust must be clearly identified
A trust solicitor can then assist in the creation of the trust, outlining the chosen trustees and the nature of the trust.