Trust Creation & Administration
Trusts have been in existence for over a thousand years. They can provide protection for assets, provide an income for beneficiaries and, in certain circumstances, help reduce inheritance tax.
Trusts are not just for the wealthy; anyone can set up a trust at any stage and you can still retain control of your assets although the ownership will be in the hands of the trustees who may include family members or professional advisors.
There are many variations of trust which can be set up during a person’s lifetime (inter-vivos) upon death or by deed of variation. The two most popular types of trust are as follows:
INTEREST IN POSSESSION TRUSTS
Usually created by will, under which the testator leaves a sum of capital to be invested by the trustees in order to provide an income for the life of the beneficiary, and also capital growth for the residuary beneficiaries.
The income is paid to the income beneficiary (typically the surviving spouse) for their lifetime and, following their death, the capital passes to the residuary beneficiaries (typically the children of the testator).
These trusts are useful to protect the family wealth from passing outside the family in the event of re-marriage of the testator or surviving spouse.
These trusts can be created by will but more often are created during the life of the settlor. The capital and income generated can be applied to any of the trust beneficiaries at the discretion of the trustees. The settlor or testator creating the trust will often create a separate ‘Letter of Wishes’ which provides guidance to the trustees, indicating how they wish the income and capital to be applied.
Usually, where the trust is set up during the lifetime of the settlor, the settlor and spouse will be excluded from the group of potential beneficiaries.
If you feel a trust might be appropriate for you or your beneficiaries, contact one of our Private Client lawyers. They will be able to advise you as to which type of trust would be most suitable.
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