Trusts may be very useful devices to utilise in certain circumstances. Historically trusts were very much aimed at tax planning but there are many differing forms of trust some of which are not necessarily aimed at mitigating tax but are rather designed more for asset protection. The most common types of trusts are:
The Life Interest Trust
A life interest trust gives a beneficiary (sometimes known as the “life tenant”) the right to enjoy the trust property for life. You might, for example, want to ensure that a loved one has the right to continue occupying your property after your death but that ultimately, once that occupation ceases, you would wish for other beneficiaries to have an absolute entitlement to the property. A life interest trust would be suitable in these circumstances.
The Trust for a Minor
Generally these are contingent interest trusts set up for children to provide for them during their childhood and to give them a head start in life. A gift, held in trust, is contingent on the child attaining a certain age (eg. 21) at which point the gift vests and the child will obtain an absolute entitlement. Whilst in trust, the trustees will be able to apply both income and (if required) capital for the maintenance, education and benefit of the beneficiary.
The Discretionary Trust
This type of trust is created in favour of a class of beneficiaries and gives the trustees the power to determine how much (if anything) each potential beneficiary should receive. For instance, if you are concerned about a vulnerable beneficiary (eg. someone who might be immature or perhaps have a mental disability) a discretionary trust can be a vehicle to assist that beneficiary without giving him an absolute entitlement to the trust assets.
Each of the above trusts has its own particular rules and tax considerations. Therefore whilst a particular type of trust might be most suitable for you it may not be suitable for somebody else.
Our private client team are all experienced practitioners in the field of trusts, including members of the Society of Trust and Estate Practitioners (STEP), and can advise you in a competent and impartial way. When advising on trusts it is important that your adviser has possession of all the relevant facts so at any initial meeting we would spend time exploring all of your concerns and objectives. Please do not hesitate to contact your local office for further information.