Why should you make a declaration of 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.
What to consider when making a declaration of trust
If the assets were to be given away out rightly, they would be the sole property of the beneficiary. They would have the power to sell or use the assets as they wished. Perhaps in a way the giver had not intended.
Using a trust allows you to add conditions to the handling of the assets. For instance if you wanted a family business to stay within the family a trust could allow you to control that whilst giving the benefits to others.
Divorce or bankruptcy
In the case of divorce or bankruptcy, assets could be lost as part of a settlement if not part of a trust, by using a trust the assets can be protected. This allows peace of mind that although the beneficiaries will receive the benefits of the trust, the assets will remain safe.
How to create a declaration of trust
In order to make a trust you should speak to a trust solicitor. There are different types of trust solicitors at Stephensons and our team will advise you on who will be best placed to help you. You will also be able to chat to our trust solicitors with no obligation, to help you with any questions you may have, or make a decision.
The advice provided to non face to face clients will be through electronic communication only i.e. by telephone and email. Stephensons Solicitors LLP assumes no responsibility for, and shall not be liable for, (a) verification of mental capacity or testamentary capacity (b) verification of any undue influence or duress involved (c) the execution of any documents.