Benefits of a Trust

Trusts have long been a cornerstone of estate planning and asset management in England and Wales. Whether established during a person’s lifetime or created upon death by a Will, trusts offer a flexible and powerful way to manage property, protect assets, and provide for beneficiaries.

At Blackstone Solicitors, we frequently advise clients on the use of trusts tailored to their unique circumstances. In this article, we explore what a trust is and detail the key benefits of using trusts in estate and financial planning.

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For a free initial discussion on how we can help you deal with the legal implications of setting up a trust, get in touch with us today. We are also experienced in dealing with all aspects of Wills and Probate and we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.

What Is a Trust?

A trust is a legal arrangement in which one or more individuals or entities (called trustees) hold and manage assets on behalf of others (called beneficiaries). The person who creates the trust is known as the settlor.

The trustees are responsible for managing the trust assets according to the terms set out in the trust deed and for the benefit of the beneficiaries. Trusts can hold various assets including money, property, investments, or businesses.

Trusts can be created in many ways, including by deed during a settlor’s lifetime (inter vivos trusts) or by Will (testamentary trusts).

Benefits of Setting Up a Trust

1. Control Over Asset Distribution

One of the most important advantages of a trust is that it allows the settlor to specify exactly how and when the assets are distributed to beneficiaries. This control can be particularly useful where beneficiaries may be:

• Minors or young adults who are not ready to manage money.
• Individuals who may lack financial experience or may be vulnerable.
• Beneficiaries with special needs who require ongoing support.
• Those who may be at risk from creditors, divorce settlements, or poor financial decisions.

Unlike a direct gift, where the beneficiary immediately gains control over the asset, a trust allows the trustees to manage and protect assets according to clear instructions.

2. Protection of Assets

Trusts provide a degree of protection against claims from creditors, divorce proceedings, or other legal challenges. This is especially relevant in commercial or family contexts where safeguarding wealth is a priority.

For example, assets placed into certain types of trusts are usually shielded from the personal debts of beneficiaries. This makes trusts valuable tools for protecting family wealth, business interests, or inheritance.

3. Tax Planning Opportunities

Trusts can offer significant benefits in terms of tax planning. Although trusts are subject to their own tax rules and rates, they can be used strategically to:

• Mitigate inheritance tax (IHT) by removing assets from the settlor’s estate.
• Control the timing and amount of income or capital gains tax liabilities.
• Provide tax-efficient ways of passing wealth between generations.

However, tax law relating to trusts is complex and frequently updated, so professional advice from a solicitor or tax specialist is essential to maximise benefits and ensure compliance.

4. Privacy and Confidentiality

Unlike probate, which is a public process, trusts can offer greater privacy. Trust arrangements and assets held within a trust generally do not form part of the public record.

This confidentiality can be particularly desirable for individuals wishing to keep their financial affairs private or avoid public scrutiny.

5. Flexibility in Estate Planning

Trusts allow for flexible estate planning solutions tailored to complex family situations. For example:

• Testamentary trusts can provide for beneficiaries over time, rather than in a lump sum, which can be helpful in second marriage or blended family contexts.
• Discretionary trusts give trustees flexibility to decide how income or capital is distributed among a class of beneficiaries.
• Trusts can be designed to respond to changing circumstances, such as a beneficiary’s education, health, or financial needs.

This adaptability ensures that the settlor’s intentions are honoured even if situations evolve.

6. Avoidance of Probate for Certain Assets

Assets held within a trust typically do not need to go through probate upon the settlor’s death. This can speed up access to funds for beneficiaries and reduce the administrative burden.

For families wanting to provide immediate support after death, trusts can facilitate faster and more efficient asset management.

7. Succession Planning for Business Owners

For business owners, trusts can be an effective way to plan succession, protect business assets, and provide continuity. Trusts can:

• Hold shares in family companies.
• Protect business interests from disputes or forced sales.
• Ensure that business control passes to the right beneficiaries under agreed terms.

This helps preserve the value and operation of the business across generations.

8. Support for Vulnerable Beneficiaries

Trusts can be specifically tailored to provide ongoing financial support to vulnerable individuals such as those with disabilities or special needs. A properly structured trust ensures:

• Financial support without affecting benefits.
• Professional management of funds.
• Protection from exploitation or mismanagement.

This is a vital consideration in many families and requires careful legal drafting.

9. Managing Large or Complex Estates

For individuals with large or complex estates, trusts can simplify administration by separating assets for different purposes or beneficiaries. This segmentation can reduce conflict and streamline the process for trustees.

10. Professional Management

Trustees can include professional individuals or corporate entities who bring expertise to the management of trust assets. This professional oversight can help:

• Maximise investment returns.
• Ensure compliance with legal and tax obligations.
• Provide impartial administration where family members may have conflicts.

What Are the Different Types of Trusts?

While there are many types of trusts, some of the most common include:

• Bare trusts where beneficiaries have an immediate right to the assets.
• Discretionary trusts giving trustees discretion over distributions.
• Interest in possession trusts where a beneficiary has the right to income.
• Protective trusts designed to protect assets from creditors.
• Testamentary trusts created on death under a Will.

Each type offers different benefits and should be selected based on individual needs and circumstances.

Potential Drawbacks to Consider

While trusts offer many benefits, there are some potential drawbacks:

• Costs: Setting up and administering a trust can involve legal fees, trustee remuneration, and tax compliance costs.
• Complexity: Trust law can be complex and may require professional advice.
• Taxation: Trusts face specific tax rules which can be less favourable than direct ownership in some cases.
• Loss of Control: Once assets are placed in trust, the settlor usually cannot directly control or access them.

How Blackstone Solicitors Can Assist

At Blackstone Solicitors, we understand the nuances and legal complexities of trusts. Our expert team can help you:

• Decide if a trust is right for your situation.
• Draft and establish trusts tailored to your objectives.
• Provide ongoing trustee services or advise trustees on their duties.
• Review existing trusts to ensure they remain effective.
• Guide you through tax and legal implications.

We work closely with clients throughout England and Wales to provide clear, practical advice and peace of mind.

Conclusion

Trusts are powerful legal tools offering control, protection, and flexibility over your assets. They are invaluable for managing family wealth, planning for the future, and providing for loved ones in a way that aligns with your wishes.

However, trusts require careful consideration and professional guidance to maximise their benefits and avoid pitfalls.

If you are considering setting up a trust or want to review your existing arrangements, contact Blackstone Solicitors. Our experienced team is here to support you with expert advice tailored to your needs.

How to Contact Our Wills and Probate Solicitors

It is important for you to be well informed about the issues and possible implications of setting up a trust. However, expert legal support is crucial in terms of ensuring your wishes are met as you would want them to be.

To speak to our Wills and Probate solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.

Authored by Ben Posted in Blog, News Tagged as

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