A Trust is an obligation binding an individual or a company, known as a ‘Trustee’, to deal with ‘property’ in a particular way, for the benefit of one or more ‘beneficiaries’.
- Control your wealth. You can specify the terms of a Trust precisely, controlling when and to whom distributions may be made.
- Protection of your legacy. A properly constructed Trust can help protect your Estate from sideways disinheritance, divorce settlements, your beneficiaries’ creditors, or from beneficiaries who are too young, inept, or incapacitated to manage their own affairs.
- Privacy and probate savings. Probate is a matter of public record; a Trust may allow assets to pass outside of probate and remain private, in addition to possibly reducing the amount lost to court fees and taxes in the process.
- Under the terms of a Will, when the ‘Settlor’ leaves instructions that when he or she dies, some or all of their Estate is to be placed in Trust.
- When a ‘Settlor’ asks a professional to draw up a Trust Deed, which then sets out the terms of the Trust.
- If a person dies without leaving a Will, the Courts may create a Trust, for example; when deciding how to deal with property for the benefit of a child or an incapacitated person who cannot manage his or her own affairs.
What is a ‘Trustee’?
Trustees are the legal owners of the Trust property:
- They are legally bound to look after the property of the Trust in a particular way and for a particular purpose.
- Trustees administer the Trust and, in certain circumstances, make decisions about how the property in the Trust is to be used.
- The Trust can continue even though the Trustees might change, but there must always be at least one Trustee.
What is ‘Property’?
The property of a Trust can include:
- Land or Buildings.
- Personal belongings, such as paintings and jewellery.
The money and investments held in the Trust are known as the ‘capital’ or ‘fund’ of the Trust. This capital or fund may produce income, such as interest or dividends. The land and buildings can also produce rental income.
What is a ‘Beneficiary’?
A beneficiary is anyone who benefits from the property held in the Trust.
There can be one or more beneficiaries, such as a whole family or a class of people, and each may benefit from the Trust in a different way. For example, a beneficiary may benefit from:
- The income only.
- The capital only.
- Both the income and capital of the Trust.
What is a ‘Settlor’?
A Settlor is the person who has put their property into the Trust. Property is normally put into the Trust when it is created, be it immediately or upon death.