Trusts are often associated with inheritance planning, but they can be useful in many different situations. A trust can help protect family assets, support vulnerable beneficiaries and ensure money or property is managed in the way you intend.
Trusts can be created during your lifetime or included within your Will. Depending on the type of trust, they may also offer tax planning benefits and help preserve entitlement to certain means-tested benefits.
Why are trusts used?
People choose to create trusts for a variety of reasons, including:
- Protecting assets for children or other family members
- Providing for beneficiaries who may be unable to manage their own affairs
- Protecting compensation awarded in personal injury or clinical negligence claims
- Specifying ownership shares in a property
- Helping with inheritance tax or capital gains tax planning
- Preserving entitlement to means-tested benefits
Every family’s circumstances are different, so choosing the right type of trust is important.
Types of trust
There are several different types of trust, each with its own legal and tax implications. Common examples include:
- Bare trusts
- Interest in possession trusts
- Discretionary trusts
- Accumulation trusts
- Mixed trusts
- Settlor-interested trusts
- Non-resident trusts
The most suitable structure will depend on your personal circumstances, your intentions and the needs of the beneficiaries.
Who is involved in a trust?
Trusts generally involve three parties:
The settlor
The settlor is the person creating the trust and placing assets into it. They decide how the assets should be used and these wishes are normally recorded in a trust deed or Will.
The trustees
Trustees are legally responsible for managing the trust assets and administering the trust in accordance with its terms. Their responsibilities can include:
- Managing trust assets
- Keeping accurate records
- Filing tax returns where required
- Registering the trust with HMRC where applicable
- Making decisions in the best interests of beneficiaries
A trust must always have at least one trustee, although many trusts appoint two or more.
The beneficiaries
Beneficiaries are the people who may benefit from the trust. Depending on the type of trust, they may receive income, capital or both.
HMRC registration and trustee responsibilities
Many trusts now need to be registered with HMRC through the Trust Registration Service (TRS), although some exemptions apply. Trustees may also have ongoing reporting and tax obligations depending on the trust’s circumstances.
Trust law and trustee duties can be complex, and failing to comply with legal or HMRC requirements can create difficulties for trustees and beneficiaries alike.
How Marlborough Law can help
At Marlborough Law, we provide clear, practical advice on trusts and estate planning for individuals and families across Hungerford, Marlborough, Newbury and the surrounding areas.
Whether you are considering setting up a trust or acting as a trustee, our team can help you understand your responsibilities and find the most suitable solution for your circumstances.
