Trust Solicitors.

In simple terms, a trust is a way to protect your assets and ensure that your loved ones have financial stability in the future. A trust is set up by a ‘trustor’ who will appoint a ‘trustee’ to act on behalf of the trustor after they’re deceased to benefit any beneficiaries.

The rules on how the trustee deals with the estate will depend on the terms and conditions on which the trustor built the trust. For example, the trust can dictate the terms of the inheritance for the beneficiaries to pass assets to specific beneficiaries at different times. For this example, typically, a spouse will receive a lifelong regular income, and other beneficiaries receive what’s remaining once the spouse has passed away.

As the terms and conditions of a trust vary on a case by case basis, the pros and cons depend on each trust. However, some common pros and cons of creating a trust include:

Pros:

• Protect the trustor’s assets. For example, if the assets were distributed to the beneficiaries and one of the beneficiaries got a divorce, it puts the assets at risk.
• Tax planning. Having a trust in place can ensure that you reduce or avoid inheritance or estate tax.
• Privacy. A trust can ensure that you don’t need to go through probate, which is public. Therefore, it can avoid people seeing the size of the estate, who you owed debts to and who will receive your assets.
• Prepares for potential loss of mental capacity. If you lose the mental ability, it makes life difficult for your loved ones as they won’t legally be able to manage your assets. Placing your property into an estate planning trust gives your trustees the ability to manage your trust if anything were to happen to you.
• Simplifies the probate process. In some cases, estate planning trusts can simplify the probate process following your death. Probate can be made more straightforward because the transfer of the ownership of your property has already happened, and so does not have to go through probate.

Cons:

• Irrevocable. Depending on the terms and conditions, you may not be able to revoke the trust.
• Expensive. Again, depending on the terms and conditions of the trust, it can be costly to establish and maintain.
• Avoidable mistakes. Mistakes when creating a trust can prove to be costly. For example, if you don’t receive the correct tax advice before setting up a trust, you can face major tax implications, such as capital gains tax and inheritance tax.

There are many different types of trust, so it’s always best to discuss your aims and circumstances with a solicitor before making a decision. Some of the most common trust types in England include:

• Bare Trust – The beneficiary has an immediate and absolute right to the trust assets, which are held in name only by the trustee. They are often used to pass assets on to young people until they reach an intended age.
• Interest in Possession Trust – Gives a beneficiary the legal right to income from the trust (usually for life), while the capital passes to another beneficiary later.
• Discretionary Trust – Trustees have full discretion over how, when, and to whom trust income or capital is distributed to potential beneficiaries.
• Accumulation – Allows income to be accumulated and added to capital.
• Mixed Trust – Combines elements of different types of trusts (e.g. part discretionary, part interest in possession), often used for tax or asset planning.

Because trusts are always bespoke and can be highly complex, it’s beneficial first to arrange an initial consultation to discuss.

In this initial consultation, our solicitors guarantee:

• Unlimited time to discuss your trust and to answer any questions you may have
• An overview of the suitable trust for you
• An upfront cost and time estimate for our solicitors to create your trust
• Straightforward inheritance tax advice

For more information, please don’t hesitate to contact our trust solicitors directly on 0203 007 5500.