Transferring your assets into a trust is often a desirable way to plan your estate and inheritance. You can also ensure most inheritance tax matters are organised before your death.
There are various types of trusts and different reasons why you might want to write your assets into a trust. You may also need guidance around managing the trust itself.
Writing your assets into a trust means they come under the control of your appointed trustees, who will manage the trust according to your instructions until no longer required to do so.
What types of trust can LawPlus Solicitors help me with?
You can set up a lifetime trust, which comes into effect immediately, and will see a trust and its trustees take over the management of your assets, or a trust will – also known as a will trust – that becomes active upon your death.
If you opt for a trust will, you will have several options:
- A property trust will, which you can use to guarantee who inherits your share of a property if your surviving partner remarries, writes a new will or changes an existing will after your death.
- A flexible life interest trust will, which works in the same way as a property trust will, but you can include your total share of your estate if you wish.
- A discretionary trust will, which you can use to appoint trustees to manage your estate on behalf of vulnerable beneficiaries who will require assistance in managing their inheritance.
As with writing a will, you have the option of creating a single trust will or a mirror trust will.
What are the benefits of using a trust?
You can use a trust to ensure your beneficiaries get the most from their inheritance or ensure most inheritance tax matters are dealt with before your death.
When you use our trust writing service, you can enjoy a range of benefits, such as:
- Choosing the most suitable and relevant trust for your needs and wishes
- Passing down your assets to loved ones as you wish
- Keeping cash safe to pass to children or grandchildren when they reach a certain age
- Funding university fees for your children or grandchildren
- Contributing to your children or grandchildren’s first property deposit
- Providing for vulnerable loved ones even after you are gone
- Ensuring financial support for children or partners from previous relationships
- Managing any lump sum or compensation you may have received
- Protecting your cash and assets from creditors or ex and divorcing partners
- Reducing beneficiaries’ inheritance tax liabilities
How do trusts work?
It depends on the type of trust you want to create. However, while a lifetime trust or a trust will comes into force at different times, how they work is generally the same.
When you create a trust, you are not directly passing your assets to beneficiaries. Instead, you make arrangements for the assets to be held and managed on behalf of those beneficiaries as per your wishes.
You would nominate people to be responsible for managing your trust, who are known as trustees.
How do trusts affect probate?
Whether or not you have a trust would not necessarily affect the process of getting a grant of probate. As with any will or matters of inheritance, the most significant determining factor as to whether probate is needed is the assets held within the estate.
If you are only placing some of your assets into a trust, this may also impact whether probate will be required when dealing with your estate.
If you are planning on only placing a portion of your estate into a trust and have further questions about how this may affect matters like probate and inheritance tax, our specialists can help you during the process of creating your trust.
Can anyone be a trustee?
You can appoint anyone over 18 to be a trustee. However, you should carefully consider the significance of creating a trust and ensure you appoint a person or persons you can rely on to manage your assets and estate as per your wishes.
If you are planning on writing a trust will, it is common to name the same person as both executor of your will and as a trustee of your trust, but you do not have to do this.
It is considered good practice to name more than one trustee. You are under no obligation to do so unless you are writing property into a trust, in which case you may be required to name two trustees. Outside of this, naming two trustees can ensure everything continues as per your wishes should one of your trustees become unable or be unwilling to act as such.
What do trustees do?
Your appointed trustees will be responsible for managing the assets you write into your trust. They must do this in accordance with any instructions outlined in your will and must take actions in the best interests of your beneficiaries.
Trustees have a financial responsibility to act in respect of the trust’s terms, including acting fairly towards your beneficiaries and, in cases where there are multiple beneficiaries, balancing their interests. The Trustees Act 2000 also obliges trustees to “exercise such care and skill as is reasonable in the circumstances.”
In summary, trustees are obliged to:
- Act impartially and with reasonable care and skill in the best interests of all the trust’s beneficiaries
- Understand what assets the trust owns and ensure they are kept safe at all times
- Recover any monies owed to the trust for whatever reason
- Keep records that demonstrate proper management of the trust
- Formally review the trust’s investments at least once a year and take professional financial advice if needed
- Store all documents relating to the trust and the trust’s assets, and make these available to the trust’s beneficiaries on request
If you appoint a professional, such as a specialist trust solicitor or an accountant, as a trustee, they will be held to higher standards than a layperson would.
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A trust is a legal arrangement that you can set up to manage your assets. There are different types of trust, and the one you choose may depend on your reasons for setting one up. How your trust is managed and taxed will differ depending on the type you set up.
Trusts can hold various assets, including cash, land, property, and shares.
You can, but it usually is not advised as it can potentially complicate inheritance issues and often will not reduce an estate’s inheritance tax liabilities by much, if at all, compared to having one trust. Instead, you might be better off exploring a mirror trust, which works in the same way as a mirror will.
It is a legal requirement to update certain details concerning your trust within 90 days of becoming aware of such changes.
If you make other changes to your trust, like adding or removing beneficiaries or assets, you should do so at the earliest opportunity. This ensures that should anything happen to you, your trust is prepared and managed 100% in accordance with your wishes.
Yes, your trust deed may be invalid if it is not notarised. This may lead to issues with administering your estate and could mean your assets are not distributed in full accordance with your wishes.
Writing your assets into a trust can be done in a matter of days.
Distributing your trust upon your death typically takes between 12 and 18 months, depending on the assets to be distributed. If you have beneficiaries under 18, your trust will remain in place until they can inherit your assets.
Not necessarily. If you have a simple estate consisting of property and cash, and everyone you want to name in your will is over 18, you probably do not need a trust. However, you may still wish to explore your options if you are concerned about your estate’s inheritance tax liabilities.
Ask us about trusts when you speak to one of our estate planning experts about writing or updating your will.
It depends on your situation and how you want your inheritance to be dealt with.
While some people set up trusts to reduce inheritance tax liabilities, some trusts will be subject to higher rate income and capital gains tax.
Speak to one of our estate planning experts to discuss your options and decide which approach best suits your needs.
In general, three parties are involved in a trust.
- Settlor(s) – the person or persons setting up the trust.
- Trustee(s) – the person or persons entrusted with managing the trust per the settlor’s wishes.
- Beneficiaries – the person or persons who will ultimately benefit from the trust, such as by receiving an income or inheriting assets at some point.
If your trust has been registered correctly, you must use the government’s online service to update the trust register and close it in accordance with anti-money laundering regulations.
When closing your trust, you will need to confirm the last provided details on the trust register are up to date and the date the trust ended.
Depending on the status of your trust, you may need to complete a tax return for the tax year in which you close the trust.
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