What is a Trust?

Trusts are a legal arrangement where you give cash, property, or investments to someone else who looks after them for the benefit of a third person.  There are three key roles within a trust:

• Settlor: The settlor is the person who creates and puts assets into the trust.

• Trustees: The trustees are individuals who control and look after the trust. The trustees are individuals who are trusted and picked by the settlor (note the settlor themselves can also be a trustee).

• Beneficiaries: the beneficiaries are those who benefit from the trust. They are the ones who receive the assets of the trust when the time is right.

Why set up a Trust?

Trusts are a good way to make sure that assets are given to beneficiaries without incurring an inheritance tax bill of up to 40% of the asset value.

If you place assets into a trust and you as the ‘settlor’ don’t benefit from it, after seven years the assets you placed will no longer be part of your estate therefore you won’t incur any inheritance tax. Trusts thus allow assets to be given in a timely and controlled manner and can be set up exactly to an individual's preference.

Having a trust avoids handing over properties, cash, or investment while the beneficiaries are very young or vulnerable. They thus offer much greater control as to where your money will go compared to a standard will.

Types of trust

There are many different types of trusts and they all work differently but it is very likely that you’ll find one that meets your specific needs. Have a read below of some of the trusts that you can set up with the benefits they each have.

The Financial Conduct Authority do not regulate trusts and inheritance tax planning.

Tax treatment varies according to individual circumstance and is subject to change