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Making a trust | Trust Administration

Making a Trust

“Protect valuable assets by holding them in a trust – protect your interests by enlisting our help to do it.”

What is a Trust and are they still relevant in the 21st century?

There are many various types of trust each having a specific purpose. To help de-mystify issues surrounding trusts here are some of the more common trusts that you may have come across. To start with some are formed during lifetime. Here are a few examples.

Asset Protection Trusts

These types of trusts can be created such that cash sums or property can be protected.  These types of trusts might be thought of as a shield. Assets put in are controlled by trustees for the benefit of children or other individuals. A good example of this might be where a parent who is concerned that assets given to an adult child might be at risk if subsequently the assets given away become subject to matrimonial proceedings or creditors paid out of a business. A trust can be created with assets now in this way. The trustees having received the initial assets may then make a loan of those assets to the children. This affords protection to the assets.

Gift and Loan Trusts

Some trusts are created in conjunction with financial products. Gift and loan trusts fall into this category. These types of trusts are used in connection with Inheritance Tax mitigation and usually are linked to a financial product.

Disabled Trusts

These types of trusts may be created by a parent or grandparent in order to provide funds for a disabled child or grandchild. They are sometimes the basis of a more wide-ranging tax planning strategy which may involve the writing of a Will with discretionary trusts contained therein.

Will Trusts

There are essentially two types of Will Trust. The first grants to the beneficiary absolute and complete rights over income or in some cases the right of occupancy in a property.

Commonly, the right to occupy the share of a property, usually the matrimonial home.

These types of trusts are common in situations where a party to the Will, perhaps in a second marriage relationship or an unmarried relationship, the principle aim will be to provide security to the surviving spouse or partner and provide guarantees to the ultimate beneficiaries (usually children). These types of trusts also have a part to play in protecting assets in avoiding making a contribution to later life care. Specific advice on that subject should always be sought.

The second type of Will Trust is a Discretionary Trust. Sometimes called a flexible trust, these trusts give power to the trustees to distribution to a pool of beneficiaries. These trusts are extremely useful where the person making the Will has complex and involved circumstances and wish to give general guidance to the trustees as to how their assets should be dealt with on their death. This guidance is normally encompassed within a single informal document – a Letter of Wishes. The Letter of Wishes should be reviewed regularly.

A Letter of Wishes gives guidance and instruction to the trustees as to how the writer of the Will would like their assets to be dealt with. The benefit of Discretionary Wills is that a Letter of Wishes can be amended at any time in the future without having to have the Will re-written.

Whatever the type of Trust that you are involved in, the role of the trustee is vital. A trustee can incur a personal liability without recourse to the trust assets if they make wrong decisions leaving them open to claims by the beneficiaries. Humphries Kirk has a huge experience of trusts and their administration. Humphries Kirk’s dedicated Trust and Tax Team was created to help with the administration of Trusts. The Trust and Tax Team or Partners in the firm’s Private Client Department would be very happy to talk to you to explore your needs and those of the Trust in order to ensure that the responsibilities and liabilities of the Trusts are being met.

For instance, it is now necessary for all the Trusts to be registered with HMRC where assets are held and income is paid to a beneficiary. In addition, Anti-Money Laundering legislation can pose difficulties for trustees who are not compliant. A trustee will need to check that they are compliant with that legislation.

Above all Trusteeships should not be onerous. With the right advice, careful planning for assets and property can be protected for those who you wish to benefit.

“All Will writers within Humphries Kirk adhere to the Society of Trust and Estate Practitioners’ Code for Will Preparation. To learn more about the Step code please click here

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