Making a Trust

Why make a Trust?

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.

Generally, Trusts are made for one of two reasons:

• Tax – for example to give assets away 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 details.

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, complete our call back form or contact us directly at your local office.