Trusts come in all shapes and sizes and offer valuable flexibility and security for your assets.
What is a Trust?
A trust is a legal arrangement for managing assets.
By creating a trust, you can give cash, property or investments to someone else so they can look after them for the benefit of the third person. The people who manage the assets are known as the 'trustees'. The person who benefits from the assets of a trust is called the 'beneficiary'.
Alternatively, a trust can protect your assets for your own benefit, such as a personal injury trust.
What is a Personal Injury Trust?
A personal injury trust is created by writing a deed. This deed allows any compensation received as a result of an accident or injury to be put into a trust, and as a result disregarded when the individual is assessed for means tested benefits.
The money is often put into a designated bank account where the money is kept safe. the beneficiary can then ask the trustees to release the funds as an when they need them. Larger sums will be invested by the trustees on behalf of the beneficiary.
At Clapham & Collinge we offer a professional trustee service for personal injury trusts. As a trustee we enjoy working with the other trustees and beneficiaries to maximise the value of an award, whether this means investing in a stocks and shares portfolio or investing in property, we value our client's wishes and consider what decisions are in the beneficiaries' best interest.
What is an Absolute Trust or Bare Trust?
An absolute trust, also known as a bare trust will grant the beneficiary, as long as they are over 18, the absolute right to the assets, and income of the trust. The beneficiaries of an absolute trust will be fixed and cannot be changed.
What is a Discretionary Trust?
A discretionary trust gives the trustees 'discretion' over which beneficiary receives assets in the trust and when they receive them. As a result, a discretionary trust offers greater flexibility over the management and ultimate destination of the trust assets. If you wish to create a discretionary trust you should always write a letter of wishes, which provides non-binding guidance to the trustees about how you would like the trust assets to be managed and distributed.
What is a Trustee?
A trustee takes responsibility for the trust assets.
A trustee can also be a beneficiary; however, certain factors may limit this from occurring, such as terms written into the trust Deed.
A trustee has control of the assets.They are under a legal duty to manage the trust in the best interests of the beneficiaries and to make sure that the rules of the trust are followed.
At Clapham & Collinge our qualified solicitors have a wealth of experience in acting as professional trustees. Our solicitors will meet with trustees and beneficiaries and discuss their plans for their trusts. The trustees can then make sure the trust is managed to meet the aims of all the beneficiaries.
The Advantages of having a Trust:
Setting up a trust such as an absolute trust or a discretionary trust, is a flexible way of giving away assets without simply passing them directly to the beneficiaries.
- A trust can allow you to maintain control over the assets, such as making sure assets are passed to the right people at the right time.
- Keep assets for beneficiaries who are not capable of doing so themselves – this can include children or those lacking mental capacity to manage their financial affairs.
- Reduce the risk that a beneficiary will lose the assets, including in the case of bankruptcy and divorce).
- Provide a lifetime income for one beneficiary.
- A trust can also be used as part of your tax planning to help reduce potential tax liabilities.
- A trust will be separate from your estate when you die, trustees can therefore access the money prior the receiving a grant of probate.
How to set up a Trust:
You can set up a trust at any time during your life. A trust can be created by having a trust deed drawn up stipulating who the trustees are and who the beneficiaries are, how the trust is to be run and what assets are being put into the trust.
Alternatively, a trust could be created when you die under the terms of your will.
If you have recently received a compensation for an injury, or wish to form a trust for any of the reasons above, we are more than happy to assist.
If you require advice from our Private Client team please do not hesitate to get in contact with us.
To arrange an appointment or for more information, please contact our dedicated Client Relations Team on 01603 693510 or email us using the 'Make an Enquiry' form on our website.
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*This article is provided for general information purposes only and does not constitute legal advice or other professional advice.
