Many people have heard of a trust but may not know exactly what it is or whether they should get one. While it's not for everyone, there are many potential benefits to setting up a trust. A trust is used to set money aside for it to be used at a later date. The money is securely held until the criteria for its release are met. You can either set this money aside for yourself or for someone else.
A common reason for this may be that you want to leave money behind after you pass away to a child but want to keep it in trust until they reach adulthood ⏱️ Or that you may need care in later life and you want to set up a trust to pay for that.
The benefits of a trust
- Avoiding probate If you set up a trust before you die, you can avoid that money going through the probate process. Depending on the type of trust, the recipient may be able to receive the money a lot quicker than they would do through a will.
- Avoiding Inheritance Tax You can choose a trust where the money effectively stops being yours and is simply held for someone else. If you do this, you may be able to avoid Inheritance Tax being paid on it as it has already been gifted.
- Almost incontestable The only rules of a trust are the ones that you set out. For example, it can’t be subject to the rules of intestacy like the rest of your estate. This means the money you leave in trust can’t be contested as long as you made it in sound mind.
- Future security Setting money into a trust can secure the future for yourself or someone else. Nothing will happen to the money unless the rules you set out are met. This allows you to set up future finances in confidence.
- More private than a will
A trust is much less of a public record than a will. It offers you the chance to have more privacy and make arrangements outside of your will
Types of trust 📁
There are a few different types of trust that you may want to consider. A bare trust is used in situations where assets are held for a trustee until they are 18. This is a simple trust and most commonly used for children. Interest in possession is a type of trust where the beneficiary will receive any income from the assets, such as income from shares. Discretionary trusts contain specific instructions such as what gets paid, to who, when and any other conditions. An example would be a child that has specific disability care needs. Non-resident trusts are for people that are not resident in the UK for tax reasons. You can also specifically set up a trust for a vulnerable person and this can have specific tax benefits.
Should I put the money from my will in trust? 💷
If you have a specific idea of what to do with your assets then it can make sense to put it in a trust rather than letting it form a part of your estate. This can avoid some of the downsides of leaving assets in a will such as the time it takes to go through probate and Inheritance Tax.
Can I put a trust in my will?
This used to be for the rich and famous, but it is becoming a necessity for almost every homeowner in the country. Regardless of how much your ‘estate’ is worth, the key question here should be whether you are concerned about the inheritance you leave behind. There are certain ways loopholes can be found and taken advantage of. All of this is avoidable and even more protection can be offered to couples (married or not) who own their homes jointly. Adding a trust option includes advice and help on how to make the best choices for your personal situation. Especially if you have children or grandchildren that you want to protect in the future.
A trust can be a great way to take care of yourself or a loved one in future. It will set money aside that can’t be touched until the rules you’ve set out are met. Once it’s in place, you can have peace of mind that you or your family will have financial security in the future. Don't forget, if you write your will with Bequest, you can choose to protect your assets using a trust. This is set up with our partners JP Estate Planning, with their help you can place all your wishes into trust for £249. They are available to answer questions and help you make the right decisions for your trust and loved ones.