What is a Trust?
Trusts can be a useful way to offer increased protection for your family. You should consider adding a Trust to your Will if:
- You have a partner, but have children from a previous relationship
- You want to protect your estate from being assessed for care costs
- You want to look after the interests of a vulnerable or disabled person after you die
- Plus may other scenarios.
A Trust is a legal arrangement which makes someone responsible for assets or property for the benefit of someone else. A Trust can be included as part of your Will or in a Trust Deed and can set up for use either during lifetime or after death.
One of the most common purposes of the Trust is for partners looking to split ownership on the family home so that each partner has a half-share. Rather than leaving this to each other, they leave their share to a Trust, which comes into force on the death of the first partner. This is a common set up for couples with children from a previous relationship.
There are many types of Trusts, which can be set up for many different reasons. A Trust may be created for the financial benefit of the person creating the Trust, a surviving spouse or child, a person with special needs, or a vulnerable person, or for a charitable purpose.
When you set up a Trust, you are asked to appoint a trustee to look after the assets. The trustee (the person charged with looking after the property) will have legal title to the Trust property which means the property will appear to be one of complete ownership and possession. However, the trustee has no right to receive any benefits from the property. The equitable title (the right to benefit from the property) belongs entirely to the beneficiary. The distinction between legal and equitable ownership is unique to Trusts.
The terms of the Trust are decided by the person creating the Trust, who can decide on the extent of the trustee’s powers and the rights of the beneficiary.
The law of Trusts is voluminous and often complicated, and it is essential to take full advice when considering establishing a Trust. We think writing a Will should be a straightforward process, which is why we do everything to ensure you are guided smoothly through the entire process.
Types of Legacy Trusts
We have a range of Trust products available to suit all your requirements.
Legacy Family Property Trust
A Property Trust is a way to ensure future generations can benefit from your property. The Property Trust ensure the beneficiary of the property, if for example your surviving partner remarries after you die, or writes a new Will that does not provide for your children. It can also help reduce the impact of residential care fees on the property value when you die. Read more about the Legacy Family Property Trust.
Legacy Life Trust
The Legacy Life Trust helps protect against inheritance tax liabilities, care home costs, creditors, bankruptcy and can protect your pension plan too. Read more about the Legacy Life Trust.
Legacy Land Trust
The Legacy Land Trust can help you benefit from potential inheritance tax (IHT) savings and potential capital gains tax (CGT) savings. The Trust of Land can remove the property from your estate, potentially saving you thousands of pounds in IHT and CGT. Read more about the Legacy Land Trust.
Legacy Family Inheritance Trust
This type of Trust is where a person gives trustees powers to decide how they deal with the income of the Trust. For example, the trustee may be granted the power to decide how much income a beneficiary should receive. A Discretionary Trust can be a good way to mitigate inheritance tax liability on an estate. It is also helpful where a beneficiary does not have the capability to look after their affairs. Read more about the Legacy Family Inheritance Trust.
Legacy Family Asset Protection Trust
An Asset Protection Trust is a Trust which allows a person to transfer assets into Trust immediately rather than planning for a transfer on death. This type of Trust is designed to protect assets for future beneficiaries and to ensure that the assets ultimately pass to the chosen beneficiaries. Because the assets are held in a Trust, they are not held within your distributable estate on your death, which means that the costs of probate may be reduced and any delay in dealing with the Trust assets is avoided.
This also means that the distribution of the Trust assets cannot be influenced by events on your death as you have already ring-fenced the assets for your chosen beneficiaries. You will also have appointed trustees you can rely on to ensure the distribution takes place as, and when, you would want it to. Read more about Legacy Family Asset Protection Trust.
Other Types of Trusts
The following is a brief description of the most common types of Trust you may come across:
This is the simplest form of Trust, where everything goes to the beneficiary when they reach eighteen.
Interest in Possession Trust
In this type of Trust, the beneficiary must be passed all the income from the Trust, less any expenses.
Flexible Life Interest Trust
If you have significant assets or investments as well as property, you may benefit from setting up a Flexible Life Interest Trust.
Such a Trust guarantees beneficiaries receive cash assets and investments, as well as property, should your surviving partner remarry after your death, or re-write their Will, changing your wishes for your children.
Inheritance Tax & the Asset Protection Trust
There can be immediate inheritance tax consequences on the transfer of the assets into any Trust, especially if the value takes the total gifts made by the individual in the past seven years to over £325,000. If the person creating the Trust continues to live in the house placed in Trust or benefits from other assets in Trust, then these assets will still be accessible within their estate in the event of their death (under the gift with reservation of benefit provisions for inheritance tax purposes).