Trusts are used to manage a person’s assets, be that money, investments, land or buildings. Different trusts have different levels of income tax depending on the type and amount of income earned. Capital gains tax (a tax on the profit of an asset increasing in value or being taken out of the trust) can also arise under a trust. Inheritance tax can also be applicable to trusts. Beneficiaries and trustees have different responsibilities under the various tax regimes. This is a complicated area of law and having expert guidance ensures that you comply with all necessary requirements. Our specialist trust lawyers can advise and guide you on all aspects relating to trust law.
How do trusts work?
The parties that are involved in a trust are:
- The settlor: the person that puts the assets into the trust. The settlor determines how the assets are to be used by documenting this in the trust deed. The settlor can benefit from a trust with a “settlor-interested” trust, which has special tax rules.
- The trustee: the person that manages the trust and are the legal owners of those assets. There must always be one trustee, though these can change without ending the trust. They deal with the assets in accordance with the settlor’s wishes that are stated either in a trust deed or will. They are the person that manages the trust on a day-to-day basis and they are responsible for paying any tax that is owing. Trustees decide how the assets are invested or used. It is possible to have professional trustees (for example, a solicitor could be a trustee).
- The beneficiary: the person that benefits from the trust. There can be more than one beneficiary. The beneficiary can benefit from either the income of a trust (for example rent that is received from a property held on trust), the capital (for example, shares held in a trust) or both the capital and the income.
There are various reasons why someone would want to set up a trust. It may be that they want to protect their family’s assets. They can also be used to handle a person’s affairs where they are not able to do this themselves, for example, because they are too young or they are incapacitated. Trusts can also be used to pass on assets either when you are alive or after you die (a Will trust). They also apply where someone dies without a Will.
There are various types of trusts including bare trusts, interest in possession trusts, discretionary trusts, accumulation trusts and mixed trusts. Trusts can have various uses such as:
- Parental trusts that be set up by parents for their children who are under 18.
- Trusts for vulnerable beneficiaries, which include children under 18 whose parent has died or a disabled person who is eligible for certain benefits. These trusts receive special tax benefits.
Contact our Trust Solicitors, Alderley Edge, Cheshire
If you are thinking of setting up a trust fund, have been asked to be a trustee or are going to be a beneficiary of a trust you will need guidance on your role and duties. Our expert trusts solicitors can help you in all aspects surrounding the setting up and management of a trust.
Call now on 01625 460 281 for a no-obligation consultation from one of our expert lawyers. Alternatively, you can complete our online enquiry form.