Trusts

What is a Trust?

A Trust is a legal arrangement by which one or more people known as Trustees hold property or assets for the benefit of others known as beneficiaries. For example a Trust can arise under a Will whereby parents leave their property investments in Trust for the benefit of children until they are old enough to take possession when they are adults. Trusts can also be used as a tax saving vehicle, or making provision for someone’s future education or financial support where the intended beneficiary may be subject to a mental or physical handicap.

Types of Trust

Trusts may appear a daunting topic at first, so before you call us it may be a good idea for you to know the types of Trust you can create. Below are the five most common Trusts which you may want to create.

1. Bare Trust - This type of Trust, also known as a ‘Simple Trust’ is where each of the beneficiaries has an immediate and absolute right to any and all income and capital.

2. Interest in Possession’ Trust - Interest In possession (or Life Interest) Trust is set up, often under a Will, to pay income to certain beneficiaries, and, on a specified date or occasion in the future, to pay the capital or other assets to other beneficiaries.

3. Discretionary Trusts - Discretionary Trusts are the commonest type of Trust for personal tax planning. A Discretionary Trust allows you to distribute the income or capital between a range of beneficiaries. The Trustees have wide discretion as to how the funds are to be distributed.

4. Other types of Trusts - Trusts can be created for various purposes such as an Educational Trust, Mentally Handicapped Trust for someone incapable of handling his or her own affairs, a Charitable Trust to provide income for specified charitable purposes. There can be a number of circumstances where an individual wishes to protect certain assets for a specified period of time or for a specified class of person or persons rather than for that asset or investment to immediately benefit them.