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Trusts - Creation and Administration
Introduction
A Trust is a legal structure whereby property (cash or land and buildings) is held for the benefit of individuals (beneficiaries) by persons known as trustees.
Trust Creation
The administration of a trust is governed by a written or implied set of rules. The advantage of having a written trust deed is that both the trustees and the beneficiaries are aware of their respective duties and rights (if any). Trusts can arise simply out of relationships and transactions between the parties, or by operation of law. These are known as implied, constructive or resulting trusts.
Often persons wish to establish trusts for tax planning purposes or in order to protect their capital and wealth for themselves and their families.
There are several types of trust including:-
1. Bare Trusts
Where trustees hold property absolutely for beneficiaries. Often the beneficiaries are minors (under 18) and unable to own property in their own right. For tax purposes the property is treated as owned by the beneficiaries.
2. Interest in Possession Trusts
Where trustees hold property on trust for beneficiaries who are entitled to receive the income for a period which is often for life. It may be possible for the beneficiaries (or other persons) to receive capital, if appropriate. These trusts provide certainty in that a beneficiary will be entitled to benefit for a fixed period, and the ultimate destination of the fund can be controlled by the Settlor.
3. Discretionary Trusts
Where trustees hold property on trust for any class of beneficiaries, none of whom have any right to capital or income. These trusts are often chosen for their flexibility or for asset protection which may be advantageous eg where potential beneficiaries may have matrimonial, financial or other difficulties. Commonly, the Trustees are guided in how they will exercise their discretion by a letter of wishes.
There may also be Capital Gains Tax reasons for establishing such a trust, particularly where reliefs apply to the disposal of the property into the trust.
4. Accumulation and Maintenance Trusts
Where trustees hold property on trust for a class of beneficiaries generally with a common grandparent. They contain elements of both life interest and discretionary trusts. Special reliefs apply.
Trust Administration
Our team at Ashfords administers a large number of Trusts, including relatively modest Trusts as well as substantial Trusts with complex and valuable assets. Our approach is business-like and responsive. We understand the need to adopt a modern approach to the creation and administration of Trusts.
