Trusts

What exactly are they, and why would I need one?

Trusts are one of those things that many people have heard of, but not many know what they actually are. Its simplest description is that a Trust involves a group of people (the Trustees) looking after something (money or property for example) for another person or group of people (the beneficiaries).

Trusts are set up for many reasons – why would you need a Trust?

A Trust fund

A Trust fund can be set up when someone is too young to handle their affairs. If you have been given property before you are 18 years old, the property is normally held in Trust until you are 18 (or 21 or whichever age is stated in the Trust Deed or Will)

Trusts can control and protect family assets

For example you might want to give someone the right to live in a property, but you don’t want them to be able to sell it. You could set up a Trust to make sure this does not happen.

If someone can’t handle their affairs because they are incapacitated

A Trust Deed allows someone to take care of a person’s affairs, if they are unable to do that themselves. This could be helping with banking and bills. It can also be used for people who are on benefits where they have inherited some money and it is in danger of affecting their benefits. If the money is put into a Trust fund so that they can’t access it immediately, then it can be excluded for the purposes of calculating their benefits. This should not be confused with a Power of Attorney.

To pass on money or property when you are still alive

This can be done for tax or other reasons. If you make a gift to your children whilst you are still alive then (provided you survive for the following 7 years) it will be excluded from your estate for the purposes of paying inheritance tax. However you might not want to just hand the money over (you may be concerned what your children might do with it!). In these circumstances you could put the money into a Trust fund. It may have left your estate for tax purposes and the children will get it under whatever conditions you attach to the Trust.

A Will Trust

A Will Trust means you can pass on money or assets when you die under the terms of your Will. This can be an age related thing such as preventing children getting property until they reach a certain age. It is also often used to benefit children by a previous relationship on your death (so for example you could let your spouse live in the family home but after she dies, then your share of the property goes directly to your children from a previous marriage.

If there is no Will, how can you split an estate?

If you die without leaving a Will then the rules about how your property is split up will often involve creating Trusts and this is usually to help people who are due to inherit something but are not yet 18 years old.

Protecting your benefits if you receive compensation as a result of a personal injury

If you are injured in an accident and receive compensation this is usually paid as a lump sum. If you are in receipt of benefits then this could cause you problems and even stop your benefits. A Personal Injury Trust Deed can help to get around this problem.

What is a Declaration of Trust?

Declarations of Trust are used to protect interests in property that are not immediately obvious and prices start at £545 plus VAT. These are two examples that come up time and again:

Protecting your deposit when you buy a house together:

If you are buying a property with your partner (married or not), what would happen if you have to sell the property because you are separating, divorcing, if one of you cannot go on the mortgage for credit reasons, or if something happens to one of you? A Will would not cover this and the person who has provided the deposit (even if this is your parents) would naturally want it back.

Where parents have the opportunity to purchase their council-owned home under a right to buy scheme.

Often parents cannot afford the cost themselves, so their children pay for the house and this is potentially very risky for the children. What if the parents go into care? The property could be sold to pay for care fees, and if the children have actually bought the house with their own money, they will need evidence of this otherwise they could lose their money.
The simple way to protect the money in both examples is by making a Declaration of Trust. The Trust states what will happen to the sale proceeds when and if the property is sold. Declarations of Trust can be set up quickly and at very little expense, and give everyone peace of mind.

An Asset Protection Trust

An Asset Protection Trust is set up by you, for your benefit, whilst you are living, and for the benefit of your chosen beneficiaries after your death. The advantages of this are that the property and assets are agreed to and expectations of those who will benefit can be managed. In addition, can be managed assets in this type of Trust may be protected if you have to go into a nursing home, but you must take specialist advice on this.

Not sure which Trust is right for you? Don’t worry, we can help

Trusts can be incredibly simple, or complicated depending on your own individual circumstances. Trusts can be used to protect an asset from possible future threats or be used to manage assets on behalf of someone who can’t manage the assets themselves (for example someone who is mentally incapable, or a child). If you have a situation where you feel a Trust would be suitable for you and your family, please get in touch and speak to our specialist team.

Get in touch, we can help answer your questions

We offer a free consultation and you can make an appointment to speak to us by calling 01623 45 11 11, emailing trusts@fidler.co.uk, making an appointment in person at our offices, by video call or in the comfort of your own home.