Making provisions for your family by safeguarding money or property in trusts can be an effective way to ensure that assets are protected and can be appropriately distributed both during life and after death.
In our previous article, we discussed why you should set up a trust and the benefits of doing so.
In this article, we discuss how to set up a trust that is legally effective and captures your wishes for the future with the support of an experienced solicitor.
A legally binding trust
When thinking about how to set up a trust, there are key considerations to be established. For a trust to be valid, the intention of the settlor (the individual setting up the trust), the assets and the beneficiaries must all be made clear from the outset. You also need to think about who to appoint as trustees.
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Decision on which assets to put into a trust
When planning the distribution of your estate, there may be a variety of assets that you wish to be managed in different ways.
Your solicitor will help you consider what you should put into trust or keep aside for a range of circumstances. The final decision will of course be yours, but our team are more than happy to advise on the legal implications if you wish.
Developing a list of all the assets that will be held in trust and the value, or estimated value of each, can be helpful further down the line.
It is crucial to remember that once you place assets into a trust, they are no longer your assets or likely to be under your sole control. It is likely, for tax reasons, that you may wish to exclude yourself from benefiting from the trust and so, you must be completely certain that you won’t need those assets any more before handing them over, so do bear this in mind from the outset.
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Choosing your trustees
Giving others the responsibility as trustees is a big decision; as the name suggests, you need to be able to trust in the individuals for life, so it must be a carefully thought-out decision.
Reliable family members and close friends could be people you appoint as trustees, you may also choose to appoint professionals. Ideally, your Trustees will be of an age and health where they can be reasonably expected to be able to perform the role for the lifetime of the trust, although trustees can change if needed.
If writing a trust into your Will, you can list the executor as a trustee but can appoint someone else if you’d prefer. We can also list reserve trustees in case the original named trustees are unable to perform the role at the time.
You should check with each individual that they are happy to take on the responsibility and ensure they are confident to manage the trusts, where required, within the best interests of the beneficiaries and will be able to put aside any potential personal interests. It is recommended to have at least 2 trustees, but up to 4 is common.
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Who are your beneficiaries?
The beneficiaries are the people who will be eligible to inherit whatever assets are placed within the trust, depending on the terms and conditions laid out when drafting.
There is no limit to the number of beneficiaries you can have within a trust. To ensure complete clarity in who is eligible to benefit, despite people changing their names through marriage or other means, it can help to give further descriptions, such as their relation to you as well as their full name.
It is completely fine to have a trustee who is also a beneficiary, so long as they will still be able to act impartially when making decisions Your intentions and the criteria for benefit should be clearly set out so as to avoid disputes in the future.
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Terms of the Trust
Before meeting with a solicitor, it can help to think about how you wish the trust to operate. For example, how might the beneficiaries receive income from, or access their assets, or should it only be accessible at a certain age or for a specific life event such as a contribution to a deposit for their first home?
The terms can be different for every beneficiary if necessary and can be tailored to your wishes. Your solicitor will discuss your ideal goals for those who will inherit and how you would like to best support them.
They will then be able to draft watertight terms for the trust to ensure that the trustees manage it effectively and in accordance with your wishes.
Contact a Solicitor for further guidance
The legalities of trusts and estate planning can be complex no matter the size of your estate. We strongly advise seeking legal advice from a specialist to ensure everything is legally binding, tax-efficient and will protect you and your family from contention further down the line.
After speaking to a professional, it may surface that a trust isn’t the best route for your individual circumstances. If this is the case, we can advise on the most suitable approach for you.
If, after reading this guidance on how to set up a trust, you are ready to instruct a solicitor to get the process started, our team of friendly estate-planning solicitors are here to help. Get in touch with our team using this contact form, or call us on 0161 969 3131.