Five reasons why you should set up a trust
April 1, 2022

A trust is a great way to protect your loved ones financially. The arrangement involves one or more trustees holding and managing the assets of one or more individuals, known as beneficiaries. Find out why a setting up a trust might be the right option for you in this blog.

You’re in control

It’s possible you’ll want someone who’s still fairly young to benefit from your assets when you die. This is entirely understandable, but they might not be ready to take on the responsibility of owning valuable property, cash or investments.

A trust offers you greater control, even if you’re not alive to make decisions yourself. When you set up a trust, you decide how it’s managed. For example, you might state that your beneficiaries will only gain access to your estate once they reach the age of 25, and the trustees can take into account your wishes when deciding how and when to pay out funds to beneficiaries.

More choice

There are several different types of trust, allowing you to choose one which caters to your exact needs. The most basic arrangement is a bare trust, whereby trustees hold the legal title for the beneficiary until the age of 18. Once the beneficiary reaches that age, they can demand the legal title is handed over to them. Alternatively, a discretionary trust means the trustees have complete control of when to distribute assets, and to which beneficiaries.

Protect vulnerable loved ones

There are several reasons why an individual might be incapable of managing their own finances, such as having a disability.  A disabled person’s trust ensures any assets are held by the trustees for the disabled individual as the principal beneficiary. This way, the assets are put to the best possible use for that person, in the same way they would be for anyone managing their finances themselves, and trusts for disabled beneficiaries are treated more favourably for tax purposes.

If you want to benefit a beneficiary who you think might be easily influenced into using the money unwisely, a discretionary trust allows trustees to decide when and if to give money to the beneficiary so that they can’t just fritter the money away or allow others to take advantage of them.

Greater flexibility

When you set up your trust, you might feel you’re ready to pass on your assets and know exactly who you wish to benefit from them. However, it’s possible for circumstances to change, meaning the way you planned to distribute your estate might no longer be appropriate in 10 or 20 years.

Holding assets in a discretionary trust gives your trustees wide powers to react to change, preventing wealth from being distributed at an inappropriate time. It’s evident how much responsibility your trustees have so it’s extremely important to carefully consider who should take on the role.

Beware the tax implications

There will be tax issues to consider when putting money into a trust – make sure you take advice about the likely implications of lifetime trusts and trusts set up in your Will.  There will be inheritance tax and income tax considerations to take into account and we can help you with this.

If you’re looking for more information about ways to organise your assets when you’re no longer around, get in touch with us on 020 8313 1300.

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