What is a trust?

 

A trust is a legal arrangement where one or more 'trustees' are made legally responsible for holding assets. The assets  such as land, money, buildings, shares or even antiques are placed in trust for the benefit of one or more beneficiaries.

The trustees are responsible for managing the trust and carrying out the wishes of the person who has put the assets into the trust (the settlor). The settlor's wishes for the trust are usually written in their will or set out in a legal document called 'the trust deed.

 

The purpose of a trust?.

 

Trusts may be set up for a number of reasons, for example to control and protect family assets when someone is too young to handle their own affairs or when someone cannot handle their personal and financial affairs because they are incapacitated in some way.

 

There are several types of UK family trusts and each type of trust may be taxed differently.

 

What is 'trust property'?'.

 

Trust property is a phrase often used for the assets held in a trust. It can include:money investments land or buildings other assets, such as paintings, furniture or jewellery - sometimes referred to as chattels.The cash and investments held in a trust are also called the trust 'capital' or fund. This capital or fund may produce income such as interest on savings or dividends on shares. Assets may also be sold producing gains for the trust. The way income is taxed depends on the type of income and the type of trust.

 

What is a settlor?.

 

A settlor is a person who has put assets into the trust. This is known as settling property. Assets are normally put into the trust when it is created, but they can also be added at a later date. The settlor decides how the assets in the trust and any income received from it should be used. This is usually set out in the trust deed.In some trusts the settlor can also benefit from the assets they’ve put in. These types of trust are known as settlor-interested trusts and they have their own tax rules.

 

The role of the trustees.

 

Trustees are the legal owners of the assets held in a trust. Their role is to deal with trust assets in line with the trust deed and manage the trust on a day-to-day basis and pay any tax due on the income or chargeable gains of the trust they decide how to invest the trust's assets and/or how the assets in the trust are to be used,  although this must always be in line with the trust deed.The trust can continue even though the trustees might change. However, there must be at least one trustee. Often there will be a minimum of two trustees.,one trustee may be a professional familiar with trusts  perhaps a  lawyer for example while the other may be a family member or relative.

 

What is a beneficiary?.

 

A beneficiary is anyone who benefits from the assets held in the trust. There can be one or more beneficiary such as a whole family or a defined group of people. Each beneficiary may benefit from the trust in a different way. For example a beneficiary may benefit in the form of income but have no access to the capital values.

 

THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE TAXATION & TRUST ADVICE

 

Please contact us if you would like advice in this area.