What is a Trust?
A Trust is an arrangement that transfers assets from one person (the Settlor) to another person or persons (called Trustees) to hold those assets on behalf of others (Beneficiaries). This can be done in life or on death, through a Will.
The Settlor must choose suitable Trustees and the Trustees will have obligations and duties towards the Beneficiaries – both set out in the Trust document and enshrined in the law. The Trustees must act in accordance with the Trust at all times.
The job of a Trustee can involve a lot of work and carry significant responsibility, it should not be taken lightly.
In some circumstances, it can be advisable to have professional Trustees. The Partners at DFA Law are often asked to take on this role and we would be happy to discuss doing so with you.
There are many reasons why someone would look to set up a Trust, such as the passing down of assets to future generations whilst providing an income to others, possible tax benefits (in certain circumstances), to provide for children, disabled or vulnerable beneficiaries, or to preserve family wealth. A common scenario would also be for flexibility – to be able to benefit a number of beneficiaries as and when circumstances suit. Here, the Trustees are afforded the discretion to make significant decisions about who to benefit, to what extent and at what point during the Trust period.
There are different types of Trust structure which can provide for all of the above scenarios and more. Each has their own rules and tax regimes.
Every situation is different and a number of factors need to be considered when thinking about setting up a Trust – family circumstances, taxation consequences, the nature of the assets, the sorts of powers to be given to the Trustees and the amount of flexibility they should be able to have. Depending on the scenario a Trust may or may not be the best option for you.