Trusts
The difference between leaving money and protecting it. A trust moves assets out of your personal estate and places them with trustees you choose, on terms you set.
A trust is a legal arrangement in which assets are held by trustees for beneficiaries, on terms set out by the person creating it. Three roles: the settlor who creates it, the trustees who hold and manage the assets, and the beneficiaries who benefit. You choose all three.
A will says who gets what. A trust decides the terms on which they get it — when, how much, subject to what, and with what protection if their circumstances change.
Trusts are not tax avoidance. They are a long-established part of English law, HMRC has a detailed set of rules for them, and they are registered and reported. Anyone who tells you a trust makes assets disappear is either mistaken or selling something.
What a trust actually protects against
Divorce in the next generation
An inheritance received outright can form part of the matrimonial pot. Held in trust, on the right terms, it is far harder to reach.
Creditors and bankruptcy
If a beneficiary’s business fails, assets they own personally are exposed. Assets held for them in trust generally are not.
Care costs — theirs, not yours
A beneficiary who later needs care will be assessed on what they own. What they don’t own outright is treated differently.
Second marriages and stepfamilies
The most common failure we see. Everything passes to the surviving spouse, who remarries, and the children of the first marriage receive nothing. A trust can provide for a spouse for life while preserving the capital for children.
Beneficiaries who need protecting from themselves
A young adult, someone with an addiction, someone who is simply not good with money. A trust lets you provide for them without handing over a lump sum.
Vulnerable and disabled beneficiaries
A properly drafted trust can provide for someone without displacing their means-tested benefits.
A trust that can't hold money can't function
High street banks have largely withdrawn from small and personal trust accounts. Trustees regularly find they hold a properly constituted trust with nowhere to bank it — a document that is legally sound and practically useless.
We get them banked. It is unglamorous, it is the thing trustees ring us about most, and it is the clearest test of whether whoever set up your trust has actually run one.
Trustee duties, in short
— Act in the beneficiaries' interests, not your own — Keep proper records and accounts — Invest suitably, and take advice where required — Register the trust and file returns — Deal with periodic charges when they fall due We can act as trustee, or support the trustees you appoint.
What goes wrong
The trust exists but nothing was ever put into it
More common than you’d think. A trust with no assets protects nothing.
The will and the trust contradict each other
They have to be drafted together. A trust behind a will that leaves everything outright achieves very little.
Nobody told the trustees what they had signed up to
Trustees have real legal duties — to act in the beneficiaries’ interests, to keep records, to invest properly, to file returns. Appointing your brother without explaining that is unfair to him.
The ten-year charge came as a surprise
Most trusts face periodic charges, and a trust is a commitment with ongoing administration rather than a document you sign once.
Who needs one
Not everyone. If your estate is comfortably within the allowances, your family is straightforward and everyone inherits outright without concern, a well-drafted will may be all you need. Trusts earn their cost where there is a second marriage, a vulnerable or young beneficiary, a business, a property to shelter, or an estate above the threshold.
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