Trusts

What are Trusts?

A trust is a legal obligation binding a person (which can be an individual or a company) called a trustee to deal with the assets, or property of the original owner (the settlor), for the benefit of those who have been nominated by the settlor to receive the assets, who are known as beneficiaries.

What are the types of Trust?

• Absolute Trust or Bare Trust or Simple Trust– An Absolute Trust is one where the beneficiaries have an absolute interest. This means beneficiaries have an immediate and absolute right to both income (interest) and capital (property). The sole duty of the trustee is to hold the property for the beneficiary and transfer it to the beneficiary, when required, e.g. on the beneficiary reaching a certain age.

• Discretionary or Flexible trusts – Discretionary or Flexible Trusts provide trustees with the power to vary the beneficiaries according to family circumstances. It can cope with births and deaths in a way that Absolute or Bare Trusts cannot. The Trustees have control over the destination of the property and the beneficiary. This means the trustees can decide how much income or capital, if any, is distributed and to whom.

• An Interest in Possession Trust is a type of trust providing the beneficiary with a legal right to the income (interest) from the trust as it arises. Because the beneficiary may not have any rights over the capital of such a trust the beneficiary is sometimes referred to in English law as a ‘life tenant’. In cases where beneficiaries are entitled to the trust capital (property), they are known in English law as ‘remainderman’.

Why should I hold my property in a Trust?

Holding your property in a trust has a variety of uses:

• For convenience, for example, if the beneficiaries are minor children and cannot deal with the property properly at this point in time.
• For Protection, if the beneficiaries are to be someone who is mentally incapable or the donor does not wish the beneficiaries to take the capital at too young an age.
• To mitigate some form of taxation, usually inheritance tax.
• To pass property on to future generations but enable the settler to retain some control over it by being a trustee.
• To allow a claim under a life policy to be dealt with a quickly as possible.

How do I assign my property into a Trust?

The first and most important step after you have decided you may want to hold your assets or property in a trust is to have a discussion with us to provide you with independent financial advice.

Once we have agreed what the most suitable type of trust for your particular circumstances we make an application on your behalf to place into a trust, the property, or assets that you wish to hold. This application must be signed by all settlers, trustees and beneficiaries. The signatures must also be witnessed by an advisor here at Ring Associates Ltd or another independent person.

Want to know more?

Talk to one of our qualified financial advisers on 01553 777600 or e-mail us at enquiries@ringassociates.co.uk

Also you may want to read the articles and associated links

Her Majesty’s Revenue and Customs

(http://www.hmrc.gov.uk/pdfs/ir152.htm)

Direct.gov.uk

(http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/InheritanceTaxEstatesAndTrusts/index.htm)