Reasons to Have a Trust

Why have a trust; trusts are set up for a number of reasons, including:

  • to control and protect family assets
  • when someone’s too young to handle their affairs
  • when someone can’t handle their affairs because they’re incapacitated
  • to pass on assets while you’re still alive
  • to pass on assets when you die (a ‘will trust’)
  • under the rules of inheritance if someone dies without a will (in England and Wales)

1. Overview
A trust is a way of managing assets (money, investments, land or buildings) for people. There are different types of trusts and they are taxed differently.

Trusts involve:

• the ‘settlor’ - the person who puts assets into a trust
• the ‘trustee’ - the person who manages the trust
• the ‘beneficiary’ - the person who benefits from the trust

2. What the settlor does
The settlor decides how the assets in a trust should be used - this is usually set out in a document called the ‘trust deed’.

Sometimes the settlor can also benefit from the assets in a trust - this is called a ‘settlor-interested’ trust and has special tax rules. Please ask for further details.
3. What trustees do
The trustees are the legal owners of the assets held in a trust. Their role is to:

• deal with the assets according the settlor’s wishes, as set out in the trust deed or their will
• manage the trust on a day-to-day basis and pay any tax due
• decide how to invest or use the trust’s assets

If the trustees change, the trust can still continue, but there always has to be at least 1 trustee.
4. Beneficiaries
There might be more than 1 beneficiary, like a whole family or defined group of people. They may benefit from:

• the income of a trust only - eg from renting out a house held in a trust
• the capital only - eg getting shares held in a trust when they reach a certain age
• both the income and capital of the trust