Bare Trusts are often used to pass assets to young people. The assets are held in the name of a trustee. The beneficiary can access the assets at any time if they’re aged over 18.
Interest in Possession Trusts (also known as life interest trusts) are better for people who need a steady stream of income. The trustee must pass on all the income (minus expenses) as it becomes available to the beneficiary (also known as the life tenant). These trusts are useful if you think your spouse could re-marry after your death and their new family could stand to inherit (putting the children from your first family at risk of receiving nothing). Shares from the family business could be held in trust to keep them in the family. A trust such as this can also save you from having to sell the family home to pay for care home fees.
Discretionary Trusts are often used to help people who lack the capacity to manage money for themselves (or to help children and grandchildren in the future). Trustees have the power to make some decisions about how the income will be spent. That includes how much is paid out in income or capital; who receives the money (and how often); any conditions the beneficiaries must adhere to.
Mixed combine various aspects of different types of trust.
People are living longer today and are more likely to require long-term care – which can be very expensive.
It is possible to prevent this by making property trust wills. These contain a provision that – on your death – your share of the property can be held in trust for your children or other beneficiaries (while allowing your partner to live in the property for his/her lifetime).
In this way you can pass your share of the property to your children or other beneficiaries – and at the same time protect your partner.
Another benefit of property trust wills is that if your spouse/partner were to re-marry or enter into a civil partnership after your death, your share of the property would be preserved for your children or other beneficiaries.
This is an important benefit because getting married or entering into a civil partnership automatically revokes a will. If your partner remarries (or enters into a civil partnership) and does not make a new will, his/her new partner and family may benefit from your share of the property.
If you have been awarded damages for a personal injury then you should consider setting up a personal injury trust.
Why? The danger is that any compensation you receive could count against you if you are means-tested for Department for Communities or local authority benefits – either now or in the future.
You may lose the benefits to which you might otherwise be entitled.
A personal injury trust puts the compensation received into safekeeping, where it should not be taken into account for state benefit assessment purposes. Any capital compensation awards placed in a trust are disregarded for means testing.
It is important to note that a personal injury trust’s structure does not remove the funds from the beneficiary’s estate for Inheritance Tax (IHT) purposes but could offer additional protection for the beneficiary’s family in the future.