Trusts Overview
A trust is a legal arrangement that records how certain assets should be dealt with on death.
Why are Trusts Important?
Trusts offer a means for people to pass their wealth on to other people they have chosen. As such, they may be used to control and protect family assets.
If a will establishes a trust, this may allow people to pass on their assets in accordance with their wishes when they die.
Common uses of trusts include the following circumstances:
- to reduce tax liability
- to protect beneficiaries who might be too young to handle their affairs
- to protect someone can not handle their affairs because they are incapacitated
Trusts created by a will or intestacy are often referred to as ‘continuing trusts’.
The process is very complex we therefore suggest you speak to our Legal Advisers to ensure the benefits and any potential disadvantages are fully understood.
What is a Trust?
In plain English a trust is a way of arranging property for the benefit or other people without giving them full control over it.
Legal Definition
The best legal definition of a trust is that it is:
- a legal obligation binding a person, the trustee
- to deal with property over which they have control, the trust property
- for the benefit of certain people, the beneficiaries, of whom the trustee may be one, and any one of whom may enfore the obligation.
The person who sets up a trust is called the settlor.
The Trust
The essence of the arrangement is that the trustees have the legal ownership of the trust property, but cannot use it as their own personal property; they have to use it for the benefit of the beneficiaries. In every trust, there is therefore this division of ownership.
A trustee can also be a beneficiary.
Life assurance in Trusts
The trustees are the legal owners and, for example, would be entitled to claim against the life office if the trust property included a life policy.
The beneficiaries have the equitable or beneficial ownership, which means that although they cannot claim against the life office, they can claim against the trustees in accordance with the terms of the trust.
