Question 1

What is a Trust?

Accepted Answer

A trust is a legal arrangement where one or more people (trustees) hold assets for the benefit of others (beneficiaries).

• Used to manage assets and pass wealth to future generations.
• Can protect vulnerable beneficiaries and reduce Inheritance Tax.
• Assets can include money, property, or shares.
• The person who sets up the trust is called the settlor, who decides the rules.

Question 2

How can a Trust benefit me?

Accepted Answer

Trusts offer several key advantages:

• Assets may be outside your estate for Inheritance Tax purposes after 7 years, reducing your tax liability.
• You can control how and when beneficiaries receive their inheritance — for example, children only after reaching a certain age.
• Assets can be protected from creditors or financial difficulties.

Question 3

How can a Trust work in my Will?

Accepted Answer

Life Interest Trusts are a popular option within Wills. They let a surviving spouse use income from the estate while preserving the capital for children.

This arrangement:
• Helps in blended families or when you have young children.
• Can avoid Inheritance Tax on certain assets and protect them from care fees.
• Lets you retain control over how your estate is ultimately distributed.

Question 4

What are the tax implications of a Trust?

Accepted Answer

Assets placed in a trust may be outside your estate for Inheritance Tax, but trusts can have their own tax charges:

• Discretionary trusts are subject to a 10-yearly periodic charge and exit charges when assets leave the trust.
• Trusts may also pay income tax and capital gains tax on growth or earnings within the trust.

Always seek professional advice to ensure assets are held as tax-efficiently as possible.

Question 5

Who should consider setting up a Trust?

Accepted Answer

Trusts are particularly useful for people who want to:

• Protect assets for future generations.
• Manage complex family situations, such as second marriages or blended families.
• Support vulnerable beneficiaries like children or disabled family members.
• Reduce their Inheritance Tax liability.

Question 6

What are the key roles in a Trust?

Accepted Answer

There are three key parties involved in any trust:

• Trustee: Manages the assets, distributes them according to the trust rules, and ensures legal compliance. Can be family members, friends, or professional trustees.
• Beneficiary: Receives benefits from the trust (such as income or capital) but does not control it.
• Settlor: Creates the trust, provides the assets, and sets the rules. May retain some benefits depending on the type of trust.

Question 7

What are the different types of Trusts?

Accepted Answer

There are several common types of trust, each suited to different circumstances:

• Bare Trusts: Beneficiaries receive assets outright at age 18.
• Discretionary Trusts: Trustees decide how and when to distribute assets among beneficiaries.
• Interest in Possession Trusts: A beneficiary receives income from the trust; the capital is protected for others.
• Life Interest Trusts: A spouse receives income for life; the remaining capital then passes to children.
• Charitable Trusts: Created to benefit charities and offer tax advantages.

Question 8

What happens to Trust assets during Probate?

Accepted Answer

Trust assets usually bypass the probate process entirely, which means they can be distributed to beneficiaries more quickly. This also means they may avoid some of the costs and delays associated with probate, and can potentially reduce the overall tax burden on your estate.

Question 9

Can a Trust protect my children's inheritance if my spouse remarries?

Accepted Answer

Yes. A trust in your Will can be structured so that if your surviving spouse remarries, the trust assets are protected and cannot pass to a new spouse. This ensures that the capital is preserved for your chosen beneficiaries — typically your children — rather than being absorbed into a new marriage.

Question 10

Can a Trust hold assets for children under 18?

Accepted Answer

Absolutely. A trust is one of the most effective ways to manage assets for young children. While the child is under 18 (or whatever age you specify), trustees hold and manage the assets on their behalf.

During this period, trustees can use trust funds to cover:
• Education fees
• Living costs
• Other expenses as permitted by the trust deed

The child receives control of their share when they reach the specified age.

Question 11

Should I include a Trust in my Will?

Accepted Answer

Whether a trust is right for you depends on your family situation, the size of your estate, and your wishes. Trusts are particularly valuable if you have young children, a blended family, a disabled dependant, or a large estate where Inheritance Tax is a concern. We recommend seeking professional legal advice to explore the best options for your circumstances.

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