Guide to Family Trusts

Why a Trust Fund?

A family trust maybe created for numerous reasons,

  • An individual may inherit a substantial sum of money but may be too young to manage the fund themselves. By placing the asset into trust it will remain secure, until a time when the individual is able to take control of the fund.
  • It is common for people to state in their will that certain assets from their estate are to remain in trust until a certain time. This can be particularly advantageous where a property is involved. The trust can ensure that the asset remains secure but can allow a beneficiary, ie a partner, to receive income or profits from it. In the case of property, the income would be generated by way of rent. Once the beneficiary has passed away the asset then becomes the sole right of another beneficiary, such as siblings or children. Only at this time, would the new beneficiaries become entitled to any generated income as well as the asset itself.
  • If a person became incapacitated, their assets maybe placed in trust. By doing this, the responsibility of managing any funds or assets is passed to the trustees.
  • A person could decide to hold cash or investments in a trust as a way of locking them away for a later date. An example of this would be a parent or relative placing money into trust in preparation to pay for university fees for the child. This is becoming increasingly popular as costs for education continue to spiral.

  • Assets can be placed in trust to allow instant access on the death of the settlor. If the asset was left to a beneficiary by way of a will, the beneficiary would be legally required to wait for the will to go through a system called ‘probate’ before any funds or assets can be released, this can be timely and expensive.
  • Different types of tax is applied to trusts, therefore it is advisable to seek assistance from a specialist tax adviser.
  • By placing assets into trust they automatically become protected from being cashed to repay outstanding debts.
  • If assets are placed in trust, inheritance tax is is not usually applied as the asset is no longer considered as part of the settlor’s estate.

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Guide Contents

What is a Family Trust?
Why a Trust Fund?
The different types of Family Trusts
How to put assets into a Family Trust Fund
Frequently Asked questions about Family Trusts
Where to get more help and advice about Family Trusts

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