Trusts can be complex, but when utilised and managed properly, taking expert advice into account, they can serve as valuable tools for achieving effective wealth protection and succession planning.
What is a trust?
A trust is a legal arrangement where an individual, referred to as the trustee, holds assets known as the trust for the benefit of another person or group of people, known as the beneficiaries. There are two main types of trusts: a lifetime trust, which can be set up during a person’s lifetime; and a Will trust, which is created upon passing.
Trusts can possess any assets that an individual could own. This includes holding bank accounts, stocks and shares, residential and commercial property, as well as art and antiques. Trusts can be created for the benefit of a group of individuals or for charitable purposes.
Why set up a trust?
You don’t have to be wealthy to benefit from trusts. Trusts can be very helpful if a person wants to use money for the benefit of children or beneficiaries who are not otherwise able to manage their own finances, for example, because they are severely disabled.
Typically, a trust is established in writing, and the document usually outlines the instructions on how the trustees should deal with it. Some trusts grant specific rights to the beneficiaries, such as a right to the income generated by the trust fund, while others provide trustees with the authority to decide how the benefits from the trust are distributed among the beneficiaries.
Trustees’ duties and responsibilities
Trustees are responsible for the day-to-day management of the trust and are required to:
- Understand the terms of the trust
- Act in the beneficiaries’ best interests
- Act with reasonable skill and care
- Act fairly and impartially
- Keep the beneficiaries informed of the trustee’s actions
- Not make a personal profit from acting as a trustee (though a professional trustee may be given the right to charge for their work in the trust document).
Trustees who fail to carry out their duties properly can find themselves personally responsible to the beneficiaries for any financial loss to the trust. Selecting a trustee is a decision that requires careful thought and consideration.
How TWM can help you
At TWM, you’ll benefit from the expertise of our dedicated team of trust solicitors who will work closely with you to provide a bespoke plan tailored to your own individual needs.
For further information on our trust service, please contact the specialist Private Client team at TWM for an initial no-obligation consultation.