- Three roles: the person who sets it up, the trustees who run it, and the beneficiaries who benefit.
- Everyday uses include life cover written in trust, a child’s inheritance, and second marriages.
- A trust can be set up now, or written into your will to start after you die.
- Some trusts have tax consequences. We’ll tell you when you need specialist tax or legal advice.
Who’s who
The settlor is the person who puts something into the trust: money, a share of a house, or a life insurance policy. The trustees hold it and make decisions, following the rules you set. The beneficiaries are the people (or charity) it’s there for.
You choose the trustees, so pick people who are sensible, organised and likely to get on with each other. You can often be one of them yourself.
The three you’ll hear about most
- Bare trust. The beneficiary is fixed and gets it outright once they’re old enough. Simple, but no flexibility.
- Discretionary trust. The trustees decide who gets what, and when, from a group you name. Useful when you can’t know now what people will need later.
- Life interest trust. One person can use something for their lifetime (say, live in the house), then it passes to others. Common in second marriages.
Do trusts save tax?
Sometimes, but that’s rarely the main reason families use them. Some trusts sit outside your estate for inheritance tax; others don’t. Putting assets into certain trusts can even trigger a tax charge of its own. Trusts also have paperwork: many must be registered with HMRC’s Trust Registration Service, even when no tax is due.
We’ll explain how the rules apply to you in plain English, and tell you if it’s worth bringing in a tax specialist or solicitor.