Trusts
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What Is a Trust?​​
A trust is a legal arrangement where you transfer ownership of your assets (such as cash, property, or investments) to someone else to manage for the benefit of a third person. This setup can help manage and protect your wealth, ensure your wishes are carried out, and potentially reduce inheritance tax.
462,000%​
Trust registrations soared from 33,000 to 462,000 in 2023
27%
Trusts hit with a 27% rise in Capital Gains Tax in 2022
7% Hold 71%​
Just 7% of UK trusts captured 71% of the income in 2022

Who’s Who in a Trust?

There are two main parties that you must define when setting out a trust in the UK:

Trustee: The person or organisation responsible for managing the assets in the trust. They have the power to buy, sell, and invest the trust’s property.

Beneficiary: The person for whom the trust is set up. They benefit from the assets held in trust.

What Does a Trust Do?​

Using a trust can be a strategic way to manage your estate and potentially cut down on the inheritance tax your beneficiaries will have to pay. When assets are placed in a trust, they no longer belong to you, which means they might not count towards your inheritance tax bill when you pass away.

Types of Trusts​

Different trusts serve various purposes, including:

  • Bare trust: Beneficiaries gain full access to assets at a specified age (18 in England, Wales, and Northern Ireland; 16 in Scotland).
  • Interest in possession trust: Beneficiaries receive income immediately, but not the capital, often for spouses with capital eventually passing to children.
  • Discretionary trust: Trustees control income and capital distribution, offering flexibility.
  • Accumulation and maintenance trust: Trustees accumulate income within the trust or pay it out under certain conditions.
  • Life interest trust: Provides income to a beneficiary for their lifetime, with capital passing to another beneficiary upon their death.

How to Set Up a Trust in the UK

To set up a trust, you need to clearly state the assets of the trust, the trustee and beneficiaries, and when the trust becomes active. Here’s how to get started:

  • Define the Trust’s Purpose: Decide what you want the trust to achieve.
  • Choose Trustees: Select trustworthy individuals or organisations to manage the trust.
  • Determine the Beneficiaries: Identify who will benefit from the trust.
  • Draft the Trust Deed: Outline the trust’s terms and conditions in a legal document.
  • Register the Trust: Register your trust with the Trust Registration Service (TRS) if required.

Why Consider a Trust?

There has been a huge increase in the amount of Trusts established in the UK over the past years.

Here’s why:

  • Tax Efficiency: Properly set up trusts can reduce inheritance tax liability.
  • Control: You maintain control over how and when your assets are distributed.
  • Protection: Safeguards assets for young or vulnerable beneficiaries.
  • Flexibility: Different trusts can be tailored to specific needs and circumstances.
Common Questions About Trusts

The trustee legally owns the property in the trust and is responsible for managing it according to the trust deed.

To set up a discretionary trust, define the trust’s purpose, choose trustees, identify beneficiaries, draft the trust deed, and register the trust if necessary.

A discretionary trust gives trustees the flexibility to decide how to distribute the trust’s income and capital among the beneficiaries.

This type of trust allows the beneficiary to receive income from the trust immediately but not the capital.

A bare trust is a simple form of trust where the beneficiary is entitled to the trust’s assets when they reach a specific age.

Looking for support?​
Are you looking for a tax-efficient way to take control of your assets?
Setting up a trust can be complex, but the benefits are significant. Our team at Secure Mortgages and Protection is here to help you through the process, ensuring your assets are protected and your wishes are honoured.
We offer personalised advice to help you find the right option for you, ongoing support that adapts your setup with your wishes, and access to our other estate planning services such as will writing.
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