Wills, Trusts & Estates News

What is a Trust? - Gill Knowles

The Law Society have recently published a 'Guide for Trustees' which provides useful information for any person considering setting up a trust or taking on the role of trustee.

The law of trusts can seem complicated and confusing but with the help of an experienced solicitor, laypersons can be guided through the particular issues and if given the correct advice, carry out their trustees duties properly.

A Trust is a legal relationship whereby one individual (the "settlor") transfers his or her assets (the "trust fund") to another individual or company (the "trustee") who holds and manages these assets for the benefit of others (the "beneficiaries").The trustees are bound by the terms of the trust deed and can only act in accordance with those terms.

Any asset can form part of the trust fund, whether it be land, cash or something intangible such as the benefit of a debt. Typical examples of assets placed into trust are: cash, shares, property and securities.

A Trust can be created either in the settlor's lifetime or by his or her will on death. A lifetime trust can, in theory, be created orally but it is preferable to create any trust by written deed. Trust deeds should be drafted by an experienced professional to ensure all legal formalities have been adhered to and the trustees given the necessary powers to manage the trust fund otherwise the trust may be void.

There are many reasons why a person may choose to place assets in a trust. One reason may be privacy. The assets are held in the trustee's name, therefore the identity of the beneficiaries and what they entitled to can be kept confidential until the trust ends.

Trusts are often used for succession planning. They allow you to make provision for your family members and relatives in a way that you desire from one generation to the next thereby 'controlling' how family assets are distributed from one relative to another.

Trusts are also used for tax planning purposes. Assets placed into a trust will not be dealt with in the estate of the deceased person (subject to certain rules) hence, inheritance tax may be reduced or avoided.

There are specific trusts for disabled beneficiaries and trusts to receive compensation awards for personal injury. These trusts are useful in that they allow monies to be held by trustees separately from the beneficiaries own capital. This means the trust fund cannot be taken into account in any assessment for means tested benefits. With a disabled beneficiary, the trust gives trustees control over the funds so that they can properly manage the disabled persons finances.

A settlor will often wish to appoint professional trustees (especially solicitors) to act as trustees. A specialist solicitor will be well versed in the complexities of trust law and fully aware of the rules and duties placed on a trustee. However there is no reason why a suitable lay person cannot also act with the appropriate advice.

For more information on the different types of trust and whether a trust is suitable for your requirements please contact Mark Duckworth or Gill Knowles at Lees Solicitors LLP Wills, Trusts and Estates Department, 0151 647 9381 or email gxk@lees.co.uk

Gill Knowles

This article provides a summary of a recent case/change in law/news item. It is intended for general information purposes only and is not to be relied upon. It does not constitute legal advice and should not be treated under any circumstances as a substitute for legal advice. Lees Solicitors LLP does not accept any responsibility for any loss that may arise from reliance upon the information contained within this article. The copyright in this article is owned by Lees Solicitors LLP and permission must be sought before reproduction or publishing.

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