Trusts Solicitors

Think of a trust as a legal container that holds assets for specific people under certain conditions. You (the settlor) place assets into this container, appoint people (trustees) to manage it, and specify who benefits (beneficiaries) and under what circumstances.

For example, grandparents might create a trust containing £50,000 for their grandchildren's education. The trustees (perhaps the children's parents and a family friend) manage these funds, making decisions about when to release money for university fees or related expenses. The trust document sets the rules – perhaps specifying that funds can only be used for education until beneficiaries reach age 25, when any remaining money transfers to them directly.

Trusts can be established during your lifetime or through your will. They provide control over asset distribution that simply giving property directly cannot match. Depending on the trust type, they might offer tax advantages or protect assets from being counted in means-tested assessments.

Trust structures vary significantly based on their purpose:

Discretionary Trusts give trustees complete flexibility to decide which beneficiaries receive what and when. This works particularly well for complex family situations – perhaps where you have children from different relationships or where future needs remain uncertain. The trustees can respond to changing circumstances over time.

Life Interest Trusts (sometimes called Interest in Possession Trusts) give one person the right to benefit during their lifetime, with assets passing to different beneficiaries afterward. These often feature in second marriage situations – perhaps allowing your spouse to live in the family home for their lifetime, with the property ultimately passing to your children.

Bare Trusts represent simpler arrangements where beneficiaries have absolute rights to assets and income, though trustees manage everything until a specified age (often 18). Parents or grandparents commonly use these for children.

Disabled Person's Trusts specifically benefit someone with disabilities, offering special tax treatment and protecting means-tested benefits.

Personal Injury Trusts safeguard compensation payments while allowing beneficiaries to remain eligible for means-tested benefits.

The right structure depends entirely on your specific circumstances and goals. Dootsons can explain options in detail and help select the most appropriate arrangement.

Trust taxation can get complicated quickly. Different trust types face different tax treatment, and rules change periodically.

Most trusts constitute separate entities for tax purposes, potentially facing charges when assets enter the trust, during the trust's lifetime (usually every ten years), and when assets leave the trust. Income generated within trusts typically faces higher tax rates than individual income, though careful planning can manage this efficiently.

Some trusts offer inheritance tax advantages that might reduce your estate's tax liability. For instance, certain life interest trusts created under wills can benefit from the spouse exemption, while trusts for disabled beneficiaries receive special tax treatment.

The key lies in structuring arrangements with both your objectives and tax efficiency in mind. Dootsons works closely with tax specialists to ensure your trust achieves its primary purpose while minimising unnecessary taxation.

This question requires careful consideration. While trusts sometimes help protect assets from funding care home fees, timing and circumstances matter tremendously.

If you establish a trust primarily to avoid care fees and subsequently need care, local authorities may view this as "deliberate deprivation of assets" and still include those assets in financial assessments. This area involves significant risk if handled incorrectly.

However, trusts created for legitimate reasons unrelated to care fee planning – such as providing for children from previous relationships – might offer some protection. The key lies in proper documentation of your intentions and appropriate timing. Dootsons can advise on your specific situation and the potential risks and benefits involved.

Serving as a trustee involves significant legal duties that shouldn't be underestimated. Trustees must:

• Act in beneficiaries' best interests at all times
• Follow trust deed terms precisely
• Manage assets prudently (including appropriate investment decisions)
• Maintain accurate records and accounts
• File tax returns and pay any tax due
• Make decisions impartially and collectively
• Avoid conflicts of interest

These responsibilities can prove demanding, especially for trusts lasting many years. Many families choose to appoint professional trustees alongside family members, balancing personal knowledge with professional expertise.

Dootsons can either serve as professional trustees or provide guidance to your appointed trustees, ensuring they fulfil their duties correctly.