What is a trust and do I need to set one up as part of my estate planning?
You may have heard about putting your money into trust and are wondering ‘what is a trust and do I need one as part of my estate planning?’
What is a trust?
A trust is a way of managing your assets. These might be, land, buildings, money or investments. There are different types of trusts depending on the outcome you are trying to achieve.
If you set up a trust you will have a:
- Settler – the individual who has put the assets into a trust
- Trustee – the person who manages the trust
- Beneficiary – the person or people who will benefit from the trust
Why do I need a trust?
There are a number of reasons why you may wish to set up a trust. HMRC set these out as:
- to control and protect family assets
- when someone’s too young to handle their affairs
- when someone cannot manage their affairs because they’re incapacitated
- to pass on assets while you’re still alive
- to pass on assets when you die (a ‘will trust’)
- under the rules of inheritance if someone dies without a will (in England and Wales)
Types of trust
There are different types of trust, with differing rules and tax regulations. Start by understanding why you need to put your assets in a trust.
Often people set up a trust because they want a relative to inherit some money when they die but not until that person is of a certain age. Or you may want to ensure that children from a previous marriage are provided for. Perhaps you wish to pay for ongoing care for a vulnerable family member.
It is important to choose the right trust for your circumstances and be aware of all the costs involved.
Professional financial advice
If you are considering whether to put your assets into a trust, it is essential to seek professional financial advice. A Lifestyle Financial Planner will work with you to understand your current financial situation and your goals and aims to ensure that any financial decisions you make are aligned with your lifestyle aspirations.
A Life Centred Planner will help you understand whether putting your assets in trust is the right choice for your circumstances. The rules and tax implications can vary, and they will ensure that you are aware of how this may affect you or your beneficiaries now and in the future.
Trusts can be a great tool to aid estate planning. However, it is vital that you choose the right solution for what you are trying to achieve.
Life Centred Planners help individuals, businesses and families achieve the best quality of life they can with the resources they have. MRA specialise in cash-flow analysis, taxation, debt management, savings and investments, lifestyle planning and much more. Life Centred Planners are passionate about working with you to help you achieve your life and financial goals, get control of your finances to enjoy a brighter financial future.