Trusts Frequently Asked Questions
FREQUENTLY ASKED QUESTIONS
All you need to know about Trusts and how they can help with Estate Planning and IHT Planning.
A trust holds assets (money, investments, land or buildings). There are different types of trusts and they are taxed differently.
- One or more Settlors- those who set up the trust and usually put assets into the trust
- One or more Trustees - those put in charge of the trust
- One or more Beneficiaries - those who benefit from the trust
A Trust might be set up for a variety of reasons, such as:
- To protect and preserve family assets
- To manage affairs on behalf of a minor
- To manage the affairs of a vulnerable or incapacitated person
- To pass on assets whilst you are still alive
- To pass on assets when you die
- Trusts might be created if you have not made a Will
A Settlor decides how the assets in a trust might be used. For example, who are the trustees, the beneficiaries, how the assets can be used and how the trustees should make decisions.
This can be done through a trust deed which is legally binding, and a letter of wishes which is not.
A Settlor may or may not benefit from the assets in a Trust. If they do, then the trust has special tax rules.
Trustees are the legal owners of assets held in a trust. They have important roles, such as:
- To deal with the assets in accordance to the information in the Trust Deed, the Will (If applicable), and the Letter of Wishes.
- Manage the assets in the trust on a day to day basis, and pay any tax which is due
- Make investment decisions and decide how the assets are used
Trustees can change and the trust can continue, but there must always be at least one trustee.
A beneficiary can be a named person, a named family, or a definded group or groups of people. They can benefit in different ways:
- The income from a trust which might be investment or saving income, or rent from property or land
- Capital from a trust, which might be periodical or specific lump sums or a share of the trust when they reach a determined age (or are deemed responsible enough by the trustees).
- Both income and capital from the trust
No. There are different types of trust which work in different ways. Also the trust deed is specific to each trust.
The different types of trust include:
- Bare Trusts
- Discretionary Trusts
- Accumulation Trusts
- Mixed Trusts
- Settlor-interested trusts
- Non resident trusts
These trusts have different tax treatment and are used for different purposes.
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