Setting up a Trust

A trust is a way of managing money or other assets (e.g. land or property). There are different types of Trust which behave differently and are subject to different tax regimes. You can set up a Trust for a number of different reasons, for example to protect family assets; to manage assets for someone who is too young or cannot manage their own assets because of a disability or to pass assets over to someone else during your lifetime or when you die. Access our guide to understanding Trusts.

For more information on Property Trusts, read our handy guide here. Additionally, find out more about Property Trust Funds.

Each type of Trust is managed differently and can be subject to different Tax regimes so it is important to consider at the outset the right Trust to cover the particular objectives of the settlor.

Bare Trusts
Assets are held by trustees but belong outright to the beneficiary. The beneficiary gains full control at age 18 (or 16 in Scotland), making this ideal for early-life financial planning. Bare Trusts are best for gifting to children, situations where you want straightforward ownership, or low-cost arrangements.

Interest in Possession Trust
One person benefits from the trust during their lifetime, while the underlying capital eventually passes to other named beneficiaries, often children from previous relationships. Interest in Possession Trusts are best for providing for a spouse or partner while protecting assets for children, or ensuring someone has the right to live in a property or receive income for life.

Discretionary Trusts
The trustees have full discretion over when and how funds are distributed. This allows long-term protection and tailored support for beneficiaries who may not be ready (or able) to receive assets outright. Discretionary Trusts are best for families who want flexibility, beneficiaries who may be young, financially inexperienced or vulnerable, or situations where circumstances may change over time.

Read more about Nil Rate Band Discretionary Trusts. There are also specific guidelines in relation to gifting assets, which is becoming increasingly popular, p articularly for parents. Read more about gifting assets and the tax implications surrounding it.

We can help you consider which type of Trust would better suit your objectives and what the implications of setting up a Trust may be.

The Trustees in effect “own” the Trust assets. Their role is to manage the assets in accordance with the Trust deed. This will usually involve dealing with the day to day management of the assets, declaring and paying any tax due on the Trust, dealing with the investment of the trust assets, accounting to the beneficiaries and sometimes using their discretion to decide how best to manage the Trust (if this is provided for in the Trust deed).