Setting Up a Trust
Jane Shaw

Here at Pannone Corporate, we have specialist experience in the setting up and management of trusts. A trust is, broadly speaking, an arrangement which splits legal ownership from economic benefit. This allows you to choose people you would like to legally own your assets (the Trustees) to make decisions and manage assets for the benefit of the Beneficiaries (the people entitled to benefit). This can be useful for tax planning purposes or for protecting young or vulnerable beneficiaries who are not well equipped to manage their own assets. Trusts also provide flexibility so that Trustees can take account of the Beneficiaries’ circumstances as they develop and decide when and how they should benefit.


Separating economic ownership and control is often helpful in ensuring that assets are passed to the intended people in the right way and in allowing businesses to continue to operate post the death of a majority shareholder.


Why Set Up a Trust?

Trusts are often used in wills to protect young or vulnerable beneficiaries or those at risk of financial difficulties or divorce in the future. The Trustees have flexibility as to the timing and manner of distributions which allows them to stagger payments to Beneficiaries and bring the trust to an end as and when control is no longer required.


Shares in private companies are often put into trust either as a form of Inheritance Tax Planning ( by way of a trust set up during the shareholder’s lifetime) or by will where a shareholder wishes to choose who makes decisions regarding the business and who benefits from dividends or sale proceeds. For example, where a shareholder has several children but one or two of them work in the business and the others do not, he may appoint the children who are involved in the business as trustees (and directors) whilst still ensuring that the other children benefit from the profits of the business.


The Role of the Trustee

Trustees are under strict duties to look after the assets under their control for the benefit of their beneficiaries so it is vital to choose your Trustees carefully as these are the people who will decide how and when funds are released from the trust. Acting as a trustee should not be undertaken lightly.  We have significant experience advising trustees of their duties and preventing/solving disputes between trustees and beneficiaries. Trustees can be family members or trusted friends or advisers and can include the Beneficiaries themselves. Trustees have to act unanimously (unless the trust deed states otherwise) so it is important to appoint people who are able to work together efficiently.


Tax Implications

Trusts have significant tax implications (both Inheritance Tax, Capital Gains Tax and Income Tax) which need to be carefully considered prior to them being established. There is no “one size fits all” structure and advice is required in each circumstance to establish how a trust arrangement suits your family circumstances and is likely to be cost-effective in the long run. Different forms of trust are taxed in different ways. Tax is an important consideration in deciding whether and how to establish a trust and what the pros and cons of the trust will be now and in the future.

Type of Trust

There are various different types of Trust. Some trusts are discretionary which means that the Trustees have complete discretion as to the timing and manner of distributions amongst a class of beneficiaries. A Trust can also be a Life Interest Trust which means that one person is entitled to the income from the Trust during his or her lifetime with capital automatically passing to certain Beneficiaries on the death of the life tenant. This is commonly used to provide for spouses in wills, ensuring that any assets not required by a surviving spouse pass to your children on death and cannot be diverted to any future partner or children of a spouse. Bare trusts are another form of trust in which the Beneficiary is treated as owning the assets themselves and can call for them to be transferred into his or her name once he or she attains the age of 18. Specialist trusts also exist for the protection and maintenance of disabled beneficiaries.


Pannone Corporate Can Help

Trusts can either be set up by will or during the lifetime of the individual. We consider each client’s circumstances and objectives carefully and set out the pros and cons of any Trust structure for the future. We guide clients through the process of deciding whether a Trust is likely to be appropriate for their family or business.

For more information, contact our team either by one of the methods listed here or by calling 0800 131 3355.

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