Establishing a Family Trust
Setting up a Trust can be extremely valuable in estate planning terms for a number of different reasons. A Family Trust can be set up in your Will or during your lifetime and ensures that your estate is distributed to your family members according to your specific instructions.
When it comes to protecting assets and controlling the distribution of your estate, Trusts are essential and Just Wills & Legal Services provide a variety of solutions depending upon your objectives.
What is a Family Trust?
A Family Trust enables you to leave your assets to your spouse, civil partner, or children in your Will. It also allows you to make the assets available to your family members while you’re still alive.
When you set up a Family Trust, you will appoint a Trustee who will be the person who must look after the Trust property in accordance with your instructions. The Trust deed will set out: who the Trustees are, who is to benefit from the Trusts assets and/or the income generated from them (the beneficiaries) and explain what is held in the Trust, i.e. the asset, property or funds.
You may also set out instructions as to how the Trustee should administer the assets.
When should you use a Family Trust?
You can set up a Trust during your lifetime or you can arrange for a Trust to be set up under your Will.
A Family Trust can be useful if you want to pass assets onto your child or children but you do not want them to receive the assets until they are older. The Trust assets will not pass to the child or children until they have reached the age specified in the Trust. This is often 18 or 21.
Another instance in which you may want to set up a Family Trust is if you want your assets to eventually pass onto your children but you also want your spouse or civil partner to be able to benefit from the assets during their lifetime.
What are the different types of Trust?
The main types of Trust are as follows:
- Bare Trust – under a Bare Trust the beneficiary is directly entitled to all of the capital and income from the Trust. The beneficiary must be 18 or over and have mental capacity
- Interest in Possession Trust – an interest in possession Trust entitles a beneficiary to the income from the Trust. The Trustee will pass on the income to the beneficiary after deducting expenses and taxes. This type of Trust can be used in a Will to give a spouse or other family member an income throughout their life. The assets will pass to the children once the spouse has died
- Settlor-Interested Trusts – under a settlor-interested Trust, the Trustee themselves (or their spouse) is a beneficiary of the Trust
- Discretionary Trust – in accordance with the Trust deed, the Trustee(s) can decide whether to distribute income or capital and how often payments are made. If there are multiple beneficiaries, the Trustees can make payments to each beneficiary according to their particular needs at any given time. An example is when money needs to be paid out for school or university fees.
- Non-Residence Trust – this is a Trust where the Trustees are not resident in the UK for tax purposes
- Accumulation and Maintenance Trust – the Trustees can accumulate the income generated by the Trust and add it to the Trust’s capital. The Trustees may also be able to pay income out to the beneficiaries.
Just Wills & Legal Services can advise on the different types of Trust and advise on which type of Trust may best fit your circumstances.
Whether online or in the comfort of your own home our professional consultants can help. To speak to one of our team contact us today.
Changes in taxation policy introduced in October 2007 mean that some Trusts no longer benefit from more favourable tax treatment. Nevertheless, there are still very valuable reasons for establishing Trusts in your Will. Each type of Trust is taxed differently.
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