As a law firm providing services across England and Wales, Blackstone Solicitors is dedicated to helping individuals protect their legacies and ensure their wishes are honoured. One of the most effective tools in estate planning is a trust. In this article, we will explore what a trust is, the different types of trusts, and the benefits of including one in your Will.
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A trust is a legal arrangement in which one or more individuals (the trustees) hold and manage assets on behalf of another person or group of people (the beneficiaries). The person who creates the trust (the settlor) transfers ownership of their assets to the trustees, who are responsible for managing and distributing these assets according to the terms of the trust.
Trusts can be established during the settlor’s lifetime (a living trust) or through their Will (a testamentary trust). Trusts can be used for various purposes, including protecting assets, providing for loved ones, and minimising inheritance tax liabilities.
Types of Trusts
There are several types of trusts, each with its own characteristics and benefits. Here are some of the most common types of trusts used in estate planning:
- Bare Trusts
A bare trust, also known as a simple trust, is the most straightforward type of trust. The beneficiaries have an absolute right to the trust’s assets and any income generated by them. The trustees’ role is primarily administrative, as they must hold and manage the assets on behalf of the beneficiaries until they reach a specified age or condition.
- Discretionary Trusts
In a discretionary trust, the trustees have the authority to decide how the trust’s assets and income are distributed among the beneficiaries. The settlor provides guidelines and instructions, but the trustees have the flexibility to make decisions based on the beneficiaries’ needs and circumstances. Discretionary trusts offer a higher level of control and protection for the assets.
- Interest in Possession Trusts
An interest in possession trust grants a beneficiary the right to receive income generated by the trust’s assets for a specified period, usually for the beneficiary’s lifetime. After this period, the assets are passed on to other beneficiaries, known as remaindermen. This type of trust is often used to provide for a spouse or partner while preserving the assets for future generations.
- Accumulation and Maintenance Trusts
An accumulation and maintenance trust is designed to provide financial support for minor children or young adults. The trustees can accumulate and reinvest the income generated by the trust’s assets until the beneficiaries reach a specified age, at which point they can receive the income or capital. This type of trust ensures that the beneficiaries have financial support during their formative years and a lump sum when they are more mature.
- Charitable Trusts
A charitable trust is established to support a charitable cause or organisation. The trustees manage the trust’s assets and distribute the income or capital to the specified charity. Charitable trusts can provide significant tax benefits, as donations to registered charities are exempt from inheritance tax.
Benefits of Including a Trust in Your Will
Including a trust in your Will can offer several advantages, both for you and your beneficiaries. Here are some of the key benefits:
- Asset Protection
Trusts provide a higher level of protection for your assets, ensuring they are managed and distributed according to your wishes. This can be particularly useful if you have vulnerable beneficiaries, such as minor children, individuals with disabilities, or those who may struggle to manage their finances.
- Flexibility and Control
Trusts offer flexibility in how your assets are distributed, allowing you to tailor the terms to suit your specific needs and circumstances. This can help ensure that your beneficiaries receive the right level of support at the right time, without jeopardising their long-term financial security.
Trusts can be an effective tool for minimising inheritance tax liabilities. By transferring assets into a trust, you can reduce the taxable value of your estate and take advantage of various tax reliefs and exemptions. For example, gifts to charitable trusts are exempt from inheritance tax, and certain types of trusts, such as discretionary trusts, can help mitigate the impact of inheritance tax on your beneficiaries.
- Continuity and Stability
Trusts can provide a sense of continuity and stability for your beneficiaries, ensuring they have ongoing financial support and protection. This can be particularly important during times of transition or uncertainty, such as following the death of a loved one or during periods of financial difficulty.
- Privacy
Trusts can offer a higher level of privacy compared to other estate planning tools. The terms of a trust are not typically made public, allowing you to keep your financial arrangements and beneficiaries’ details confidential.
Steps to Include a Trust in Your Will
Creating a trust and including it in your Will requires careful planning and legal expertise. Here are the key steps to take:
- Identify Your Objectives
Consider your specific objectives for including a trust in your Will. Think about who you want to benefit from the trust, the type of assets you want to transfer, and any specific conditions or instructions you want to include.
- Choose the Right Type of Trust
Based on your objectives, select the appropriate type of trust that best suits your needs. Consult with a solicitor to understand the benefits and implications of each type of trust and determine the best option for your estate planning goals.
- Appoint Trustees
Choose individuals you trust to act as trustees and manage the trust’s assets on behalf of your beneficiaries. Trustees can be family members, friends, or professional advisors, such as solicitors or accountants. It is important to select trustees who are capable of fulfilling their responsibilities and have your beneficiaries’ best interests at heart.
- Draft the Trust Deed
Work with a solicitor to draft the trust deed, which outlines the terms and conditions of the trust. This document should include details about the beneficiaries, the trustees’ powers and responsibilities, and any specific instructions for managing and distributing the trust’s assets.
- Incorporate the Trust into Your Will
Include the trust in your Will by specifying the terms of the trust and the assets to be transferred into it. Ensure that your Will is legally valid and accurately reflects your intentions.
- Review and Update Your Will
Regularly review and update your Will to ensure it continues to reflect your current wishes and circumstances. Life events, such as marriage, divorce, the birth of children, or significant changes in your financial situation, may necessitate changes to your Will and the terms of your trust.
Conclusion
A trust is a versatile and powerful tool in estate planning, offering numerous benefits for asset protection, flexibility, inheritance tax planning, continuity, and privacy. By including a trust in your Will, you can ensure your wishes are respected and your loved ones are provided for in the best possible way.
At Blackstone Solicitors, we are here to guide you through the process of creating a trust and incorporating it into your Will. Our expert team can provide tailored advice and support to help you achieve your estate planning goals. Contact us today to discuss your needs and take the first step towards protecting your legacy.
We have a proven track-record of advising upon all aspects of private client work. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.to incorporate, what kind of ownership
How to Contact Our Private Client Solicitors
It is important for you to be well informed about the issues and possible implications of writing a Will. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to us 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.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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