Trusts

What is a Trust?

A trust enables you to pass on your assets or property to a person, or people, of your choice, and determine how it will be used. Common trusts involve leaving a sum of money to a child or grandchild to be used as university fees, leaving your property to your spouse, or donating collector’s items to charity.

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The Types of Trust Available

Protective Property Trusts

A Protective Property Trust (PPT) is one of the most widely used trusts in Wills today. The trust will usually take your share in your home and give another person, usually a surviving spouse or civil partner, a life interest in it.

The terms of the trust would allow the surviving spouse to continue living in the property free of rent and without any interruption, usually for the rest of their lives. They are referred to as the ‘life tenant’.

Why a PPT?
  • PPTs give tenants entitlement to rental income from the property.
  • The trustees have the power to sell the property.
  • The trustees have the power to move without complications.
  • It prevents the property from passing to a new spouse should the trustee remarry.
  • Your share of the property will be protected if your spouse moves into care.
  • PPTs protect you should your spouse fall into bankruptcy.

Discretionary Trusts

Discretionary Trusts are one of the most commonly used trusts. In simple terms a Discretionary Trust is one under which the trustees have the power to use the trust assets for the benefit of any of the named beneficiaries as they see fit. They

No beneficiary has any right to any of the assets in the trust, they only have a chance that the trustees could benefit them.

Why Choose a Discretionary Trust?
  • Protection of beneficiaries from third party.
  • Flexibility in financial management.

Disabled Discretionary Trust

A Disabled Discretionary Trust (also known as a disabled person’s trust and a vulnerable person’s trust) is a special type of trust used to benefit a disabled beneficiary. The trust will name a principal beneficiary and whilst they are alive, the trustees will use both the income and capital of the trust for the principal beneficiary’s benefit as they see fit.

Flexible Life Interest Trusts

A Flexible Life Interest Trust (FLIT) can allow a person (usually a surviving spouse or civil partner) to benefit immediately upon your death all whilst protecting the value of assets for other eventual beneficiaries.

The FLIT is a great means of providing for your spouse without passing your assets directly to them, and also offers long term protection for your family potentially across multiple generations.

Right To Occupy Trusts

A Right to Occupy Trust (RTO) in its simplest nature allows a person (the occupant) to live in a property after you have died for the rest of their life, or for a certain amount of time, or until they are a certain age. This will be without the payment of rent but the occupant will need to pay all outgoings (such as bills) and keep it in a good condition.

RTOs generally do not allow for the occupant to move property and will end if the occupant stops living in the property but powers to move can be included if desired.

Why Choose a Right To Occupy Trust?
  • You may have a friend or relative living in your home and wish for them to be able to continue to live in the property for the rest of their lives.
  • You may wish to allow them to live in your property for a short period of time to allow them time to find an alternative place to live.
  • You may wish to allow your guardians to live in your property to look after your children.

When is a Trust Necessary?

Trusts give you more autonomy than passing the assets in a Will because they give you more choice in how they will be used, and can prevent them from becoming corrupted in the process. A trust is not always necessary, but can be useful in the following circumstances:

If you have a dedicated savings account for your successors

If you have placed money aside for specific members of your family, then a trust will ensure that it is used only for the purpose with which it was intended. This could cover university fees, purchase of a first car, a house deposit or other purposes. Setting up a trust will protect this money, and safeguard your loved one’s future.

To protect vulnerable beneficiaries

Trusts can protect vulnerable loved ones who may not have the capacity to manage the money themselves, or are particularly susceptible to scams or other harmful behaviour for a number of reasons. This could be age, disability or even illness.

To prevent access to the money for nefarious means

In some rare situations, you may wish to protect your money or the beneficiary from being taken advantage of by someone who may want access to the assets in question. A trust would add an additional layer of protection.

To preserve historical or collector’s items

Trusts ensure that valuable items are cared for or displayed in the manner you deem most appropriate. This is because you can decide exactly what to do with them, for example, donation to a museum for display. Where a loved one might not honour this wish, a trust would ensure it comes to fruition.

To protect assets from creditors

Trust funds that can only be accessed at a certain age will be protected from creditors or debts that the beneficiary may owe, protecting it until it can be used for its dedicated purpose.

To pass on inheritance in a tax efficient manner

Certain types of trust can pass money and assets onto beneficiaries in a more tax efficient manner.