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Trusts? What’s it all about then?

24 January 2022 |

Trusts in its simplest term is a legal way of managing assets that you currently own but want others to benefit from at varying stages in life.

Many people choose to set up trusts for a variety of reasons, a few examples of these would be:

  • To have control over and to protect family assets
  • When a person may be too young to deal with their affairs themselves
  • When a person may not be able to handle their own affairs due to incapacity or a disability

The trustees that you give the power to handle your assets are then responsible for managing those assets. As the name suggests, the beneficiaries are the ones who will ultimately benefit from the assets you set aside. It is the responsibility of the trustee(s) to ensure that this takes place.

Which trust is right for me?

Discretionary Trust

Discretionary trusts are common in the UK, as they allow the trustees to have complete control over any capital, and any kind of income that may be generated from assets. In addition to this, the trustees also decide on how these assets are distributed to the beneficiaries.

For example, a trust of this nature would be considered if there were minor grandchildren in the family, with the parents acting as the trustees.

Vulnerable Beneficiary Trust (VBT)

This trust is set up for a beneficiary who may fall into one of the following categories:

  • A disabled person
  • Someone under the age of 18 whose parent has died
  • Someone who is deemed unable to manage their own affairs owing to mental incapacity

A VBT comes with the added advantage of reduced tax payments on income or profits received from the trust.

How does this benefit me?

Trusts are put into place for the benefit of another. Common reasons people would look to place assets in a trust would be first and foremost, to have peace of mind. Knowing your assets are in good hands so that your loved ones can benefit from them in the future, is paramount. This can be whilst you are still alive, or when you pass away.

A trust can also be seen as a way to minimise the amount of inheritance tax liability that may be incurred. For example, if a person setting up a trust for a vulnerable beneficiary is still alive seven years after the trust was initiated, there will be no inheritance tax to pay at all.

Contact our Long-Term & Elderly Care Solicitors

Planning ahead is a delicate process that requires time and careful consideration. We pride ourselves on giving the best advice and offering tailor-made solutions to suit your circumstances. Feel free to contact us with any queries you may have, our friendly team of experts would be delighted to hear from you. You can call us on 0117 906 9400 or email hello@gl.law. Alternatively, please complete our contact form.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

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