Trusts
Complete Guide to Trusts in Estate Planning
A trust is a legal arrangement that allows assets to be held and managed by one or more people (known as trustees) for the benefit of others (known as beneficiaries).
Trusts are commonly used as part of estate planning to protect family wealth, provide for vulnerable loved ones and control how assets are passed to future generations.
While trusts can offer significant legal and practical benefits, they are complex legal arrangements and should usually be created with professional advice.
GOV.UK's overview of trusts and taxes is a useful starting point for the tax side of any trust.
What Is a Trust?
A trust separates the legal ownership of an asset from the person who ultimately benefits from it. There are usually three parties involved:
The Settlor — the person who creates the trust and transfers assets into it.
The Trustees — the people responsible for managing the trust and acting in accordance with the trust deed.
The Beneficiaries — the individuals who benefit from the trust assets.
Why Are Trusts Used?
People establish trusts for many reasons, including:
- Protecting family wealth.
- Providing for children.
- Supporting vulnerable beneficiaries.
- Managing inherited assets.
- Succession planning.
- Business planning.
- Tax and estate planning.
- Reducing the risk of family disputes.
Every trust should be designed around the family’s specific circumstances.
Common Types of Trust
Bare Trust — assets belong to the beneficiary outright, although they are managed by trustees until the beneficiary is legally entitled to take control.
Discretionary Trust — trustees decide how and when beneficiaries receive money or assets, following the terms of the trust.
Interest in Possession Trust — a beneficiary has the right to receive income from trust assets while the capital is preserved for other beneficiaries.
Vulnerable Person’s Trust — designed to help protect beneficiaries who are unable to manage their own affairs because of disability or other qualifying circumstances.
Life Interest Trust — often used by couples to protect family assets while allowing a surviving partner to continue benefiting from them during their lifetime.
What Assets Can Be Placed Into a Trust?
Trusts may include:
- Property.
- Investments.
- Cash.
- Shares.
- Business interests.
- Life insurance policies.
- Valuable personal possessions.
The suitability of each asset depends on the objectives of the trust. Where inheritance tax planning is a factor, GOV.UK’s guidance on trusts and Inheritance Tax explains how trust assets are treated.
Trustee Responsibilities
Trustees have important legal duties, including:
- Acting in the beneficiaries’ best interests.
- Managing investments responsibly.
- Keeping accurate records.
- Following the trust deed.
- Avoiding conflicts of interest.
- Complying with tax and reporting obligations.
Being a trustee carries significant legal responsibilities.
Advantages of Trusts
Depending on the circumstances, trusts may:
- Protect family wealth.
- Help vulnerable beneficiaries.
- Provide greater control over inheritance.
- Reduce family disputes.
- Support long-term succession planning.
- Assist with business continuity.
The benefits depend on the type of trust and the family’s circumstances.
Do You Need a Solicitor?
Because trusts can involve complex legal and tax issues, professional advice is highly recommended. A solicitor can help:
- Select the appropriate trust.
- Draft the trust deed.
- Advise trustees.
- Explain tax implications.
- Integrate the trust into your wider estate plan.
Compare Trust Solicitors Near You
Find a Funeral helps you compare experienced trust solicitors throughout the UK.
Whether you’re creating a family trust, protecting vulnerable beneficiaries or planning your estate, compare trusted legal professionals near you.
No. Trusts are used by families with a wide range of assets and financial circumstances.
Yes, although legal and tax advice should be obtained before transferring property into a trust.
Depending on the type of trust, yes. This is relatively common in some family trust arrangements.