Protect your wealth By Michael Fogg
Discretionary Trusts Where Trustees have discretion to decide what gets paid out to which Beneficiary, as set out by the Trust Instrument. This could be any Trust income or capital. Accumulation Trusts Like Discretionary Trusts, the Trustees may be able to pay income out. These Trusts also give the Trustees the ability to accumulate trust income and add it to trust capital. There is also the potential to mix elements of the four Trusts detailed above. It is also possible for the Settlor to be a Beneficiary and/or a Trustee of a Trust that they decide to set up. There are different rules which govern Trusts when some or all of the Trustees are not UK residents for Tax purposes. As a professional Private Client Solicitor, I’m often asked about Trusts. For my first article in the Cardiff Times, I’ve tried to answer some of the more common questions. Please get in touch if you have any other questions you want answered in future months. What is a Trust? A Trust gives an individual (called the Settlor) the ability to appoint one or more people to look after assets for others. It is a legal entity, much like a person, a business or a society. A Trust is created by a document called a Trust Instrument which: • appoints one or more Trustees, (who are responsible for managing the assets and dealing with legal responsibilities like tax returns), • defines the Beneficiaries of the Trust, and • states how the Trust assets can be managed. A Trust can legally own assets – either as real estate property or more liquid assets like life policies, shares, or cash, for the benefit of the Trust’s beneficiaries. There are several types of Trust which can be used by a Settlor, with differing aims. These include: Bare Trusts Where the Beneficiary has a right to all Trust capital and income at any time from their 18th birthday. Interest in Possession Trusts Where Trustees have to give all Trust income (less any expenses) to the Beneficiaries when it is received.
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What are the Costs? The legal wording of a Trust Instrument needs to be precise, so you should ask a solicitor to set it up for you. The cost charged by a solicitor will vary, but is likely to start from between £1,000 – £2,000. There are also often additional costs, chargeable to tax, depending on the amount that is initially put into the Trust. Are Trusts just for the ultra-wealthy? It is a common misconception that Trusts are just for those who have significant wealth. In fact renowned American polymath Oliver Wendell Holmes, Sr once advised that a man should “put not your trust in money, but put your money in trust”. Now more than ever it is sensible for anyone who wants to leave assets to members of their family to consider one. It is possible to set up a Trust for several reasons, including: • Making sure that your own money is used for you if you can’t look after yourself; • To look after the needs of someone who isn’t able to manage their money (for example, someone with mental health condition or learning difficulty, especially if they are in receipt of means tested benefits); • To ensure that your assets get to your chosen Beneficiaries before your death. If you are interested in discussing how a Trust could help you, we would be happy to answer any questions by phone or email. Please get in touch at TrustingWillpower@outlook.com or on 029 2021 1693.
