Make Trusts or live on crusts
Trusts are a way of ensuring that when a person passes away, their assets will be looked after or dealt with how they see fit. In UK law, a trust is an arrangement whereby a person establishes a plan concerning who will be responsible for their assets when they die.
The person who is given this responsibility is called a trustee and there is often more than 1 trustee stated on the will. The deceased person is referred to as the settlor, either in a legal document entitled the trust deed or stated in the will itself.
There are many beneficial reasons why a person might want to set up a trust before they die. Trusts help the family to protect their assets and keep precious items within the family. Trusts are also useful if the person who is due to inherit assets is too young or inexperienced to deal with the death of a family member and their legal affairs. In setting up a trust, the settlor ensures that the assets their young benefactor will one day inherit remain safe until they are legally entitled to claim them. If a trustee suffers from incapacitation, a trust plan is a useful way of making sure they are not taken advantage of, either by rivalling family members of the law itself (the latter is uncommon but should not be ruled out).
Trusts are also beneficial because they allow a person to establish who will receive which assets while they are still alive. It is not always the case that the settlor will reveal this information to their beneficiaries, but they are able to live the rest of their days knowing that after their death, their assets will be allocated to those who they see fit.
There are a range of trusts that UK law permits and each one is taxed in a different way. Some of the different trusts available are:
- Bare trusts allow the beneficiaries the rights to capital and income on assets immediately after the will is announced in court. Beneficiaries have to pay income tax on any financial revenues created by the trust.
- Interest in possession trusts allow the beneficiary to receive trust income as it is comes.
- Discretionary trusts are when the trustee uses their discretion when using the income of the trust.
- Accumulation trusts are when the trustees are given authority to increase their income.
- Mixed trusts are literally when more than one trust type is combined and the different parts of a trust remain separate in terms of their tax rules.
- Settlor-interest trusts are the kind of trusts that a person might leave to their partner to ensure the assets are left to them.
- Parental trusts for children are established to give benefits to minors who are under the age of 18.
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