There is a common misconception that trusts are only relevant to, and used by, the wealthy. However, they are accessible to all and can be a useful tool as part of a wider inheritance tax planning strategy.
There are various reasons why a trust may be set up; some can be written into your Will and others can be set up independently. Here we explain what trusts are, what they do and the different types of trust available.
A trust is a legal arrangement that enables you to give assets, such as cash, property or investments, to someone else to look after for the benefits of a third party/beneficiary. Once placed in a trust, they no longer belong to you.
Trusts involve three key parties: the ‘settlor’, the person who puts assets into a trust; the ‘trustee’, the person who manages the trust; and the ‘beneficiary’, the person who benefits from the trust.
When choosing your trustee, it’s important to remember that they will have the same powers to buy, sell or invest your assets as you would have before putting the assets into a trust; you must therefore trust this person to manage the trust responsibly and in the best interests of your beneficiary.
There are several reasons why you may set up a trust:
The kind of trust you choose depends on what you want it to do. The most common forms of trust are:
With each type of trust being taxed differently, it’s important to speak with a qualified professional before choosing which trust is the best for your circumstances. If you would like further advice on setting up a trust, please contact a Finura adviser.
The Financial Conduct Authority does not regulate will writing, taxation and trust advice.
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