Trusts: why set up a trust?

Trusts are often misunderstood and whilst they can be complex, they are often very useful.

A trust arises when assets and property are put under the control of one set of people (trustees), for the benefit of another set of people (beneficiaries).

Trusts often arise in Wills but can be set up during your lifetime too.

Trusts can have a number of benefits from reducing the amount of Inheritance Tax payable on your death, to managing and protecting your assets during your lifetime.

There are many reasons someone may choose to set up a trust. For example:

• To control the benefit a beneficiary will receive;
• To minimise Inheritance Tax;
• To ensure your wishes are carried out in the event you or your partner have children from a previous relationship or your spouse or partner enters into another relationship after your death;
• To protect your assets should your spouse or partner need nursing care in the future; or
• To protect a personal injury settlement.

Trusts are taxed independently taxed for Income Tax, Capital Gains Tax and Inheritance Tax purposes and different types of trusts are taxed in different ways. It is therefore important to fully understand the consequences of any trust you are involved in.