Knowledge

An Introduction to Trusts

January 25, 2022

Rebecca Bright, Tax Director for UK-based firm, Duncan & Toplis, has recently published, ‘an introduction to trusts’, outlining various aspects when it comes to understanding the definition, benefits, and intricacies of trusts. Divided into nine sections, the article begins by clarifying how trusts can be used and how they may be valuable assets. A trust, she writes, is often a particularly useful tool in terms of facilitating tax planning and asset protection.

What is a trust?

It is a legal arrangement where assets are placed into the care of an individual who manages them for the benefit of another person, who may (potentially) then take legal control of the assets in the future.

What are the benefits of a trust?

The benefit of this for the person who settles the asset is that they effectively relinquish their ownership of it, meaning the asset can be given as a gift, long before it reaches the intended recipient. The merit of having one is then discussed, and it is said that people are often cautious about creating a trust because they believe that once an asset is in a trust, it is there for life. However, this isn’t necessarily the case. The most important point to remember is that, once you have settled an asset into a trust, you can (generally) have no enjoyment of that asset in the future. If you do, then you are deemed to not have made the gift.

What types of trusts are there?

Rebecca explores the three types of trusts Discretionary trusts, Immediate Post-Death Interest in Possession (IPDI) trusts, and Bare trusts – is provided before a summary of the important things to consider when selecting one’s trustees, beneficiaries, and settlors.

Who benefits most from a trust?

In summary, the introduction to trusts highlights how trusts can be both a useful and practical tool for passing on assets to future generations, ensuring provision for children in the event of a parent’s death, protecting money for future school or university fees, and protecting wealth or assets from divorce or Inheritance Tax. If you would like to read the full article, please click here.