Setting up a family trust
There is considerable flexibility in the way in which a trust can operate.
In terms of setting up a trust, the formalities involve creating a trust deed. This is the last stage in the process. If you are considering setting up a trust it’s essential to fully understand the implications of doing so.
Types of trusts typically include :-
Discretionary Trust – these types of trust can vary considerably, with trustees potentially given very wide discretion as to what to do with assets, such as selling or retaining existing assets, buying assets and potentially also discretion over which of the beneficiaries should gain more from the assets than others. Discretion can be limited in certain ways, and in this type of trust the beneficiaries are named, but the trustees are given the power to decide how to distribute the assets between them.
Interest in Possession Trust – this type of trust there is a short term beneficiary who benefits during his or her lifetime, but upon that person’s death the asset or assets are then utilised by or transferred to another beneficiary.
With this type of arrangement, it is important to ensure that the asset or assets are preserved, so it may be that the beneficiary with the initial interest only receives income and the trustees are expressly instructed to preserve the assets or adopt a conservative approach towards dissipation of the asset.
Fixed Trust – this type of trust is often utilised where the intention is to benefit certain named beneficiaries and where the settlor intends to be clear and certain about the respective entitlements of the beneficiaries, perhaps by reference to percentages.
There are potential tax implications which should also be considered carefully when deciding whether or not to set up a trust, as well as considering the possible advantages and disadvantages of doing so.
If you need a solicitor for setting up a family trust, drafting a trust deed, issues on administering a trust or legal issues or problems with trustees, or in relation to the related taxation issues, please do get in contact with us.
What are the advantages of a discretionary trust?
There are a number of possible advantages of setting up a discretionary trust, which include:
- Protecting beneficiaries from creditor claims:if no individual beneficiary has a legal entitlement to the trust assets, those assets will be protected from the beneficiaries’ creditors;
- Planning for the future: whilst the trust may be discretionary, certain instructions may be incorporated, for example a provision which states that certain beneficiaries will not become entitled to benefit until they reach a certain age or until specified events happen, or that they should lose entitlement on the occurrence of certain events;
- Potentially, the reduction of inheritance tax liability;
- Provision for disabled or vulnerable relatives or children from previous relationships;
- Providing a means of protecting assets from divorce;
- Protecting your wealth, especially if you have trustees you are very confident you can rely on.
If you need a solicitor for setting up a family trust, drafting a trust deed, issues on administering a trust or legal issues or problems with trustees, please do get in contact with us.