Are you concerned about protecting your assets now and in the future? Our established Trusts & Tax team offer a full range of legal and taxation services to individuals and trustees.
By creating a trust, you are placing assets under the control of someone you nominate. This may be yourself, a professional trustee or someone you trust. The people who are in charge of the trust are called trustees.
The trustees will manage the trust in accordance with how you set the trust up. This can continue even after your death.
Trusts can be used to manage wealth, investment, land and property. You can set up trusts for a number of purposes such as:
Administering a trust can be a complex, time-consuming and stressful process – in both human and legal terms. We can explain the process at every step and ensure it runs as smoothly and is as straightforward as possible.
Our Derbyshire based specialist tax lawyers can determine whether a trust suits your needs and if what time of trust will be best for you. We can then help you set up the trust and manage it for you.
When you create a trust, you enter into a legal relationship with the trustees of that trust as well as the beneficiaries. The trustees that are listed on the trust are entrusted with managing the assets within the trust for the specified purpose that was outlined by you, the settlor.
Trusts have several legal characteristics that are beneficial to know. These characteristics are:
In UK law there are various type of trusts that can be created, each with different characteristics. It is important to speak with a lawyer when creating a trust in order to determine which type will best suit your requirements.
The assets included in a bare trust are held in the name of one of the trustees. Additionally, the beneficiary of a bare trust has the right to all of the capital and income of the trust, provided that they are over the age of 18. The benefit of a bare trust is that any assets that have been set aside by the settlor will go directly to the intended beneficiary.
Bare trusts are commonly used to pass assets onto younger people and the trustees look after the included assets until the beneficiary is old enough to access them.
For example, you may leave some money in your will for a child, this money will be held in a trust. Once your child reaches 18 years of age, they are entitled to those assets and any additional income (such as interest) that they have accrued, taking possession of them at any point they choose.
An interest in possession trust allows you to pass on any income generated from the included assets to a beneficiary.
For example, if you own shares in the stock market, you can create a trust for all owned shares. Then within the terms of the trust, you can state that when you die the income generated from those shares goes to your spouse for the rest of their life. When your spouse dies, the ownership of the shares will pass to your children.
In this instance, your spouse is the beneficiary and has an ‘interest in possession’ in the trust, but they do not have a legal right to the shares themselves.
With a discretionary trust, the trustees can make decisions about how to use the trust income and sometimes the capital.
Depending on the trust deed, the trustees can decide:
Discretionary trusts are often created to put assets aside for future needs, such as a grandchild who may need more financial support than other beneficiaries, or beneficiaries who are not capable or responsible enough to deal money on their own.
Accumulation trusts allow the trustees to accumulate income within the trust and add it to the capital within the trust. They may also be able to pay out income in a similar manner to discretionary trusts.
Mixed trusts are a combination of more than one type of trust. The various parts of the trust are treated in accordance with the tax rules that apply to each part.
Settlor-interested trusts are where the settlor or their spouse/civil partner benefits from the trust. These trusts can come in the form of an interest in possession trust, accumulation trust, or a discretionary trust.
For example, if you cannot work due to illness, you can set up a discretionary trust to ensure you have money in the future. As the settlor, you may also benefit from the trust as the trustees can make payments to you.
These are trusts where the trustees are not residents of the UK for tax purposes. The tax rule for these types of trusts are very complicated so it is highly advisable to seek the guidance of a lawyer when try to set up a non-resident trust.
Different types of trusts have different tax implications across income tax obligations as well as capital gains tax and inheritance tax. Speak to a lawyer to fully understand the tax implications of your specific or visit the GOV UK website for more information on the tax implications of trusts.
It is possible to reduce your inheritance tax bill with a trust. This is because when you put assets into a trust it is no longer considered part of your estate, provided that certain conditions are met.
The specific role of a trustee may change depending on the type of trust and who created it. However, in general the trustee(s) are the legal owners of the assets held in a trust and their role is to:
The trust can still continue of the trustee(s) where to change but their must always be at least one trustee.
A lawyer can help you to decide on the right type of trust for your needs as well as advise on any potential tax implications of your choice. Things that a lawyer can help you with in regard to trusts include:
You may choose your lawyer to be a trustee which will allow them to provide the other trustees and the beneficiaries of trust with their legal expertise to ensure that the management of the trust is within accordance of the law.
You can set up a trust whenever you like, or you can write one into your will. When you set up a trust you must clearly state what assets will be included in the trust, who the trustees and beneficiaries are, and when the trust becomes active.
Whether you are based in Matlock, Wirksworth or anywhere across England and Wales we will be able to help. We have over 100-year history of helping the people of Derbyshire and the surrounding areas.
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