There are many kinds of trusts. At Davisons, our trust law solicitors can advise you which type
is best for
you, what conditions you might include in the trust, and how to reduce your family’s tax
bill.
Bare trust
With a bare trust, assets are held in trust and looked after by trustees until a
beneficiary is
18 years old. The beneficiary then inherits all the assets held in trust. The
beneficiary of the
trust may be exempt from paying inheritance tax.
Charitable trust
By setting up a charitable trust, you can leave assets to a charity that you would like
to
support while lowering the inheritance tax bill for your family.
Discretionary trust
By law, the materials used for building work must be of ‘satisfactory
quality’
and ‘fit for purpose’. If a builder purchases substandard materials, then it
is
their responsibility to seek a refund from the Supplier and to make good their work.
Vulnerable beneficiary trust
This is a trust set up for a child who has lost a parent or somebody who has a mental or
physical
disability. A vulnerable beneficiary trust receives ‘special tax treatment’,
which
means the beneficiary will receive maximum financial benefit.
If there are other beneficiaries of the trust who are not classed as vulnerable, their
portion of
the trust will be kept separate for tax purposes.
Property trust
A property trust can help to prevent property from being used to pay long-term care
costs. If you
and your partner own your property in joint names as tenants in common, you can set up
this
trust.
When you and your partner create a Will, you each leave your share of the property in
trust. When
one of you dies, that share of the property will pass into the trust, which means it
cannot be
used by the local authority to calculate care fees. Eventually, the share of the
property
protected in the trust will pass on to the beneficiaries of the Will.
Trust of land
A trust of property that includes land is also known as a ‘trust of land’.
The law on
trusts of land is covered by the Trusts of Land and Appointment of Trustees Act 1996 (or
TLATA).
The TLATA sets out the powers of trustees to manage and sell land and the rights of
beneficiaries to occupy land.
Trusts of land are set up to manage estates in a tax efficient manner. It is a complex
area of
trust law, and our specialist solicitors at Davisons can advise you.
Life interest trust
This is similar to a property trust in that it protects property from being used by the
local
authority to calculate long-term care fees. The difference is that a life interest trust
protects all your assets and not just your property.
You can also choose somebody to benefit from the trust while they are alive but at the
same time
protect the underlying capital for your other beneficiaries after that person has died.
For
example, you could leave your property to your spouse but ensure that it passes to your
children
after your spouse has died. This can be particularly important if you have remarried and
wish to
pass assets on to children from your first marriage.
