A trust is a legal arrangement where a person (the settlor) places assets, such as property, money, or investments under the care of another person (the trustee) to manage for the benefit of a third party (the beneficiary or beneficiaries).
A parent places money into a trust for their child. or a third party professional, who manages that money according to instructions set out in a legal document called trust deed.
Trusts are powerful tools in estate planning. They allow you to:
However, trusts are complex legal structures. If not set up correctly, they can lead to unexpected tax issues or confusion. That’s why it is essential to seek professional advice before creating one.
The person who creates the trust and transfers assets into it. They decide the purpose of the trust and who will benefit.
The individual or institution responsible for managing the trust in line with the instructions in the trust deed. Trustees handle day-to-day decisions, investments, and tax matters.
The person or people who benefit from the trust. They may receive:
Bare Trust – Assets are held in the name of a trustee, but the beneficiary has the right to the assets at age 18.
Discretionary Trust – Trustees decide how and when beneficiaries receive funds, offering flexibility and control.
Life Interest Trust – A beneficiary receives income for life, while the capital is preserved for others after their death.
Charitable Trust – Created to support a charitable cause or organisation.
Probate Trust – Transferring a property into a probate trust can help avoid the lengthy and costly probate process, saving both time and money for your loved ones at a difficult time.
There are two main types of trusts based on timing:
Created through your Will and comes into effect after your death.
Created during your lifetime and becomes active immediately. These are often used to
manage wealth, protect against care fees, or gift assets while retaining control.
Trusts can help you:
Trusts are powerful and flexible tools that can serve many purposes in estate and financial planning. Here are some of the most common and valuable uses:
When someone passes away, their estate may be subject to Inheritance Tax, potentially reducing the inheritance left for loved ones. With the right trust structure, you can minimise or even eliminate this tax liability, preserving more wealth for your family.
Probate can be a lengthy legal process during which beneficiaries may be unable to access their inheritance. Assets held in trust are not subject to probate, allowing for a smoother and faster transfer to your loved ones.
If your assets exceed £23,250, you may be required to pay for long-term care often involving the sale of your home. A properly structured trust can shield your assets, helping protect your estate from being used to fund care fees.
In cases of remarriage, children from previous relationships may be unintentionally disinherited. Trusts ensure that your assets pass only to your direct descendants, safeguarding your children’s and grandchildren’s inheritance.
If you own a family business, a trust can help manage a smooth transition of ownership, reduce tax implications, and ensure control remains with chosen successors.
Trusts allow you to set conditions on when and how young beneficiaries receive their inheritance, typically at age 18, 21, or older. This protects them from making poor financial decisions or falling under outside influence.
Trusts can provide long-term financial support for dependents who are disabled or incapacitated, without affecting their eligibility for means-tested state benefits. This ensures they’re cared for without losing essential support.
