Setting up a Trust

Protecting your assets is important, and one of the main ways to do this is by setting up a trust. The solicitors at PM Law can advise you on how to set up a trust and which type of trust would be most suitable for you.

Protect your assets by setting up a trust

Trusts are a secure way of keeping your assets safe for someone until that person is ready to access them. If you're someone who is always thinking about the future, then get in touch with us to discuss setting up a trust.

Our expert solicitors have years of experience advising clients on the benefits of a trust and how they can be used. We're always happy to share our insights and knowledge that will benefit you and your loved ones in the future.

 

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What is a trust?

A trust is a relationship whereby property, whether that be land, money, assets for example is held by one party for the benefit of another. The trust is governed by the terms under which it was created which are usually written down in a trust instrument or deed.

Why use a trust?

There are many purposes that a trust can fulfill. You can make gifts to individuals of anything from money to property through a trust. However, one of the main benefits of a trust is that it can only be accessed by the beneficiary (who the trust is for) when the trustee (person overseeing the trust) lets them. This makes it a great option for safely holding assets until a time when the beneficiary is old enough, or responsible enough, to access the trust.

The use of a trust may be more appropriate as part of basic inheritance tax planning and you may prefer to leave the decision making process to people you can trust following your death.  You can take the value of property, outside of your estate without losing control of it and avoid excessive liability to Inheritance tax.

Trusts can be used for monies received as a result of a successful personal injury claim.  Where the money in trust is compensation paid for any personal injury to the beneficiary, the value of the trust fund and the value of the right to receive any payment under the trust is disregarded for some benefits considerations.

Types of trust

There are different types of trust that give different benefits. It's essential that you understand how each type of trust works so that you can choose the one that best suits your circumstances. Many people get the help of a solicitor when deciding which trust to use as it can be difficult to know which one would benefit you the most. Here are some common types of trust:

  • A discretionary trust allows trustees to hold the trust assets with the power to choose how they are used for the benefit of one, or more, of a group of potential beneficiaries. Using this type of trust helps to limit the access of someone deemed to be irresponsible with money, for example.
  • A bare trust is very simple. You can keep someone's assets in a bare trust but in someone else's name - this allows the assets to be passed one to the beneficiary when ready to do so. Bare trusts are commonly used to hold assets for young people until they're old / responsible enough to use them.
  • Interest in possession trusts allow the beneficiary to have access to the Trust from when it's setup. However, they do not have control over the assets that provide the income and the beneficiary also has to pay income tax on the money they receive.

How to set up a trust

A secure trust needs the help of a solicitor to ensure the wording is precise and that it ultimately operates as intended. We'd always advise you to be as prepared as possible before meeting with us to ensure you're making the most of your time.

You can break up the process of setting up a trust into four distinct steps:

  1. Choose the assets: deciding what assets you want to be included in the trust is the first, and arguably most important, step.
  2. Pick a trustee: a trustee can be an individual or management company. You must have complete trust in them to control the assets.
  3. Determine the beneficiaries: make a decision on who will be entitled to receive the benefits. You should also include how you'd like the benefits to be split between the beneficiaries.
  4. Detail the terms: the terms of your trust should include the following:
  • The fund's objectives
  • Original trust assets
  • The details of the beneficiaries
  • How the benefits are to be paid
  • How the trust will be settled
  • The rules for the operation of the trust bank account

If you'd like to discuss the process of setting up a trust in more detail, we're always happy to share our knowledge. Our team are on-hand to answer any questions you might have - we want you to feel confident making the big decisions.

Need for more information on wills, trusts and probate?

Couldn't find the answer you were looking for? You can find plenty more useful information on wills, trusts & probate on the following pages:

Setting up a Trust FAQs

Didn’t find the answers you were looking for? Look at the FAQs below for more information on our trust services.

The main cost for setting up a trust are the solicitor's fees. It could cost around £1,000 or more to instruct a solicitor to help you set up a trust. 

It can become quite tricky if a beneficiary gets divorced after the trustee dies. When a trustee dies, the spouse of the beneficiary could argue that the trust be treated as a financial resource and be used to fund a financial award. The spouse could also argue that the trust is a nuptial trust that can be varied. 

In the unfortunate event that this happens, we'd always recommend getting in touch with your solicitor as soon as possible to discuss your options.