A trust is a three-party relationship, involving ‘settlor’, a ‘trustee’ and a ‘beneficiary’. The first party(settlor) will transfer assets to the secondary party (trustee) to benefit the third party (beneficiary). These assets may be money, property or investments.
Trusts have many advantages. They enable you to:
-Provide financial support to a loved one who lacks (or has suddenly lost) the ability to manage their own affairs
-Ensure that your money is used to provide for your needs if you become unable to take care of yourself
-Take assets out of your estate to reduce how much tax your beneficiaries will have to pay when you die – ensuring that your hard-earned savings go towards looking after your family instead
-Pass on your estate to your heirs without the time, cost and publicity of going through probate
-Help protect your assets from legal action by creditors or other litigants
-Appoint successor trustees who can manage the trust after you have passed on – enabling your family to grow and manage its wealth for the benefit of generations to come
-Some people set up trusts to reduce their tax liability – or to mitigate the impact of care home fees in their old age
Discretionary trusts continue to be a popular way of ensuring what happens to a family’s assets after a key breadwinner has died. That’s because they are useful for families in which one or both partners has remarried (where there may be children from more than one marriage).