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Trust Planning Advice

When people think of ‘Trusts’ they tend to conjure up images of parchments, quills and the very wealthy.  In reality there many everyday uses for trusts that are universally beneficial to all.

Why would you set-up a trust?

Typically trusts are set-up for one of three reasons:

  1. Administrative convenience e.g. minor children who are not suitable, capable or able to administer the trust property for themselves.
  2. Protection e.g. to protect minor children or those who are vulnerable and are not suitable, capable or able of administering the trust property for themselves.
  3. Tax mitigation e.g. inheritance tax

What is a trust?

A trust is a method of organising property (e.g. shares, cash, a house)  for the benefit of someone else (e.g. minor children) without giving them full control over it.

An individual (the settlor) binds a person (the trustee) to deal with the property (the trust property) over which he or she has control, for the benefit of certain people (the beneficiaries).

Example:

The Settlor:Grandfather
The Trustees:Father and Uncle
The Trust Property:Share portfolio
The Beneficiaries:Minor children

The trustees are the legal owners of the trust property, whereas the beneficiaries are the beneficial owners.

What can be put into trust?

Virtually anything can be put into trust.  Noteworthy exceptions are ISAs or PEPs into trust.

What is required to make a trust valid?

For a trust to be effective it needs to have the following features or three certainties:

  1. Words.                 There must be no doubt that a trust was intended.
  2. Subject.               It must be clear as to what is to be put into trust.
  3. Object.                The intended beneficiary must be clear.

Who controls the trust?

The trustees control the trust property but must act in accordance with what the trust document or trust deed says.  If the trustees act outside their powers or for their own self-interest they are said to be in breach of trust.

What powers and duties do the trustees have?

The trustees must act in the best interest of the intended beneficiaries.  They have ultimate power to use the trust property as they see fit to ensure the beneficiaries are adequately provided for.  This could mean selling a property or making decisions over whether to buy or sell some shares.  The trustees must act prudently and honestly as if they were dealing with their own property, where necessary they must seek suitable independent advice.

Advice and Planning

Using Trusts as part of a holistic financial plan can prove an invaluable method to control tax and capital flows. Advice in this area is complex and subject to constant change so regular reviews are essential to ensure any planning is still relevant.

Contact us today if you would like advice or information on how Trusts might be of benefit for your financial affairs.