Many people consider trusts to be complex legal arrangements for ultra-wealthy people who wish to hide assets or avoid paying tax. However, trusts can be used by anyone as a legitimate way of protecting family assets or tax planning.

Barry McDonough, Wills, Trusts and Probate Solicitor at Jackson Lees, discusses how a trust can help you protect your family’s assets.

What is a Trust?

Simply, a trust fund is a way to help protect your assets and guarantee that your loved ones have financial stability for their future. A trust is created when there is a formal transfer of assets (such as property, shares, or simply cash) is made by an individual which allows another person, or people, to benefit from the trust assets.

An example of this is when parents or grandparents are concerned that their children and/or grandchildren are at risk if they receive or inherit too much when they are too young. In such circumstances, they can create a trust to hold the assets until the children are older and more capable of managing the money for themselves.

Once the assets are in a trust they will be managed by the Trustees for the benefit of the Beneficiaries.

Wirral Globe: Barry McDonough, Wills, Trusts and Probate Solicitor at Jackson LeesBarry McDonough, Wills, Trusts and Probate Solicitor at Jackson Lees (Image: Jackson Lees)

Why set up a Trust?

Trusts can be set up for a number of reasons:

  • To control and protect family assets.
  • When a beneficiary is unable to manage their assets themselves, for example because they are too young or do not have the capacity.
  • Under the rules of inheritance, if somebody dies without a Will.
  • Tax planning.

A trust can be created within a Will or in a person’s lifetime. Broadly speaking, these will have the same effect, although there are some different tax consequences depending on which route you take.

A common reason for using a Will trust is to avoid inheritance eventually passing to someone such as a subsequent spouse or even someone completely unrelated to you. If the surviving spouse remarries but fails to make reasonable provision for existing children in a new Will there is a risk that children will not inherit anything, and that the entire estate will pass to a new spouse or some other individual. 

A grandparent may wish for a grandchild’s trust fund to be used for their education or to purchase a property, but not wish for the trust fund to be spent on holidays and cars. A trust can therefore protect the assets from the beneficiaries themselves or from third-party influences.

A trust may also allow Trustees to adapt to the circumstances and create an element of flexibility. If an individual makes an outright gift of property, they cannot change their minds and give it to somebody else. 

Ultimately, there are many different types of trusts that can be set up depending on the individual circumstances and advice should be sought at the earliest opportunity to establish whether a trust would be suitable.

If you would like to talk to one of our empathetic specialist advisers, you can call us free on 0808 296 3258 (also free to call from mobiles) or email Alternatively, visit our website