What is a Trust?

A Trust is created when you give assets (generally property, shares or money) to a small group of people (the 'Trustees') and tell them to hold onto those assets on behalf of one or more different people (the 'beneficiaries').

A Trust can be made during your lifetime or within a Will.

Generally, the terms of the Trust have to be written down so that everyone knows where they stand.

Why Make A Trust?

Generally, Trusts are made for one of two reasons:

  • Tax - for example to give assets away so as to avoid paying inheritance tax on those assets when you die.
  • Family planning - you may want to give assets to your children but are worried about them being too young, or losing those assets in a divorce.  By putting the assets into trust you can protect against these problems.

Common Examples Of When Trusts Might Be Used 

  • Holiday homes - you might want to put a holiday home into a Trust so that all the family can use it, but you won't have to pay inheritance tax on it when you die;
  • In a Will - if you are married or have a partner, using a Trust in your Will can help save inheritance tax when one or both of you dies
  • Care home fees - if you put your home into a Trust, you may avoid the local authority being able to assess your home as part of your assets when deciding whether you can afford to pay care home fees.  See our advice for the elderly page for more detail.

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Why Can't I Just Give My Assets Outright To Who I Want?

Some people wonder why they need to use a Trust - why not just give your assets straight to whoever you want?  Here are some reasons why that might not be a good idea:

  • Control - if you give assets to a Trust and you are one of the Trustees of the Trust, you have control over whether the asset is sold or not.  There have been lots of cases of people giving assets (even their homes) straight to their children, who then go on and sell that asset straightaway, even if they have promised not to!
  • Capital gains tax - if you give an asset straight to someone, you will have to pay capital gains tax if it is worth more now than it was when you bought it - even though you haven't actually sold it.  If you use a Trust you can in certain circumstances avoid paying that tax straightaway
  • Divorce/bankruptcy - if you give an asset to someone it will be counted as theirs if they get divorced, are made bankrupt or even die.  This could mean the asset is lost in a way you never expected. If you use a Trust this shouldn't be an issue

 

How Do I Make A Trust?

You should see a Trust solicitor to make a Trust. There are different types of Trust and a Trust solicitor can advise which one is best for you. Trust solicitors can also make sure that you know all the tax effects before you do anything, which is far better than being landed with a big tax bill you weren't prepared for.

If you would like to have a chat about your options or how we may be able to help you please contact a member of the team below, complete our call back form  or contact us directly at your local office.

Your Wills, Trusts & Probate Team

Helen Biglin

Partner

Helen qualified as a solicitor in 1993 and at that time joined Walton Hardy & Clough in Darlington as a member of their Wills, Trusts & Probate team.…

Michelle Coulson

Solicitor

Michelle qualified as a solicitor in 2006, specializing in criminal law. In 2013, Michelle also trained in private client services and private family…

Holly Naylor

Solicitor

Holly began her legal career as a paralegal in BHP Law’s Family team. She completed her first training seat in the Personal Injury team managing road…

Peter Leach

Legal Executive

Peter is a Fellow of the Institute of Chartered Legal Executive and has over 35 years experience in dealing with Probate matters. Peter joined BHP Law…

Laura Vipond

Legal Executive

Laura has worked in the legal profession for 20 years. She completed her training at J W Mitchell Dodds & Co and remained at that firm when it merged…

Lisa Wright

Trainee Legal Executive

Lisa began her legal career with BHP Law in November 2003 when she joined the personal injury department in a secretarial/support role to assist three…

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