We help you decide if a Trust is right for your circumstances
Put into simple terms, a Trust is an agreement between people about the protection and use of property. When used as a part of your Estate Planning, a trust can either be formed whilst you are alive, or you can use your Will to create a Trust when you die.
The most important point to a Trust is its purpose. What do you want to achieve? The answer to that question will determine whether a Trust is the right solution. For example, if you want to leave money to young children, then the money will need to be held in trust until they are old enough to receive it.
For most people, the biggest asset that they own is their house. Therefore, Trusts are often formed to protect property. You should be aware that even within the legal profession, there is a great deal of misunderstanding about Trusts – what they can do, what they can’t, how to set them up correctly, when to set them up, what problems they solve, what the rules are and the best advice is about Trusts.
If you think that a trust may be worth looking at as part of your Estate Planning, then we would be happy to speak to you – in confidence – about the options. You need to know the downsides to setting up a Trust as well as its benefits.
Contact us and we will arrange for a consultant to visit you for an informal chat, without cost or obligation. There is more information given below, but your easiest, fastest and best option is simply to pick up the phone and give us a call.
Trusts - The basics
All trusts involve three key people:
The Settlor – the person creating the Trust.
The Trustees – the people that will take care of or manage the property placed in Trust.
The Beneficiary/s – the people that will take any benefit from the property placed in Trust.
A settlor can also be a trustee and a beneficiary. Similarly, other trustees can also be beneficiaries of a Trust.
A Trust may be accompanied by other documents that support the trust such as a Letter of Wishes and Minutes of the Trustee Meetings.
Once the Trust documents are drawn up, signed and witnessed, the property that is going to be protected can then be transferred into the trust. From that point forward, the Trust protects the property.
An example would beYou want to make sure that your house stays in the family. Taking advice and guidance from us, you decide to set up the “Smith Family Trust”. You as the “settlor” (the creator of the trust) decide to also appoint your son and daughter as trustees (the care-takers of the trust property). You will be the beneficiary of the trust whilst you are alive – you need to live in the house! If you decide to move to a new house during your lifetime, then the trust will protect your new home too. After your death, your children will become the beneficiaries.
We would take instructions from you and based on these instructions, we create the trust and all necessary accompanying documents. Once you are happy with everything, we produce your final documents and supervise their signing and witnessing. We would then transfer your property into the trust.
Trusts - Fact v/s Fiction
Hopefully, you found the above information helps your understanding of Trusts. It has been simplified for easy consumption, and Trust law can be complicated. What complicates matters more is that there seems to be a great deal of misinformation about Trusts. These misunderstandings sometimes even find their way into the legal profession itself!
Here’s one very common misunderstanding:
“Trusts must be in place for 7 years before they will work.”
THIS IS NOT TRUE! This false information comes from the fact that Trusts have often been used to deal with inheritance tax problems and there is a “7-year-rule” in inheritance tax legislation. But Trusts themselves work straight away.
Here’s a few more:
“Putting a trust in a Will is just as effective as creating one during life.”
NOT TRUE. There is a difference and it all depends on what the purpose of the Trust.
“A Will trust becomes the Trust itself once you have passed away.”
NOT TRUE. A trust written into a Will is actually instructions for the executors to create a Trust at that point. The Will does not “become” the Trust.
“You can’t create a Trust to protect a property that has a mortgage on it.”
NOT TRUE. You can protect your property, even if it has a mortgage on it.
“Property placed in Trust will avoid Inheritance Tax”.
NOT TRUE. This all depends on the nature of the Trust and the assets placed into trust. Trusts can be a part of your inheritance-tax planning, but they are certainly not a cure-all! This one is incredible, but we hear it more often than you might think.
We even heard a solicitor say this recently:
“Trusts don’t work”.
ABSOLUTELY NOT TRUE! Trusts have been around for the last 800 years. The entire British economy relies on the workability of Trusts.
Truth of Trusts
Rather than give you a long list of true information about Trusts, it will be simpler to point out how you can know what is and isn’t true, or who you can rely on to give you correct information.
There are qualifications available from the Society of Trust and Estate Practitioners (STEP). These are perhaps the most well-recognised qualifications that relate to this area of the law. A STEP-qualified practitioner will usually be able to give you correct information about Trusts.
Of course, even someone that has a qualification does not necessarily have all the information. The person is just that – a person. There are competent people and incompetent people in any profession, regardless of what qualifications they hold.
Therefore, another good general rule is to look at the length and depth of experience that a person has. By depth of experience, we mean how often does the person or company deal with that particular area. For example, a Solicitor or Financial Planner may have been in practice for 10 years, but if they only write half a dozen Wills per year and one or two Trusts, then their experience will be very shallow.
Finally, you might want to check what supporting evidence a person has for any statement they make. We had a client case that comes to mind to illustrate this point. At an initial meeting, our clients decided that they wanted to create a Trust. They had three sons, but only wanted to leave their inheritance to two of them, for personal and valid reasons. They were concerned that the dis-inherited son would contest. They also wanted the Probate process to be as smooth as possible for their sons. The Trust was the right thing to do. Following the meeting, a friend of theirs said that he had investigated Trusts in the past and his solicitor had put him off. He advised that they speak to his solicitor, which they did. The solicitor told them that “these types of Trust don’t work.” They very wisely asked the solicitor to provide some evidence of this, which they couldn’t. Had they simply accepted the solicitor’s information, merely because they held the title “solicitor”, then their family would have potentially suffered the loss of thousands, if not tens of thousands of pounds.
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