{"id":23820,"date":"2024-09-11T10:50:15","date_gmt":"2024-09-11T09:50:15","guid":{"rendered":"https:\/\/www.benhams.com\/news\/?p=23820"},"modified":"2024-11-19T11:01:48","modified_gmt":"2024-11-19T11:01:48","slug":"what-is-a-trust-for-property-owners","status":"publish","type":"post","link":"https:\/\/www.benhams.com\/news\/landlords\/what-is-a-trust-for-property-owners\/","title":{"rendered":"What happens to property left in a trust"},"content":{"rendered":"

Trusts are not only for the super wealthy or Ultra High Net Worth families, but work for people with property assets. Trusts help with managing inheritance tax<\/a>, allowing people to pass assets on to the next generation or even grandchildren, yet in many cases retaining some control over the assets. <\/p>\n

\"What<\/p>\n

Trusts can hold both moveable and immovable assets \u2013 although property, shares and bonds tend to the main holdings.<\/p>\n

Who are the Parties involved in a Trust? <\/h2>\n

There are three primary people involved
\n1. The Settlor \u2013<\/strong> the person who actually creates the trust and gifts the assets into the trust (usually the estate owner);
\n2. The Trustee \u2013 <\/strong>the person who manages the trust (usually a trust company, bank, or solicitor) and;
\n3. The Beneficiary \u2013 <\/strong>the lucky person who receives the benefits, whether that be income, capital or a mix of the two.<\/p>\n

Care home costs, divorce and remarriage are often valid reasons leading many property owners to create trusts. <\/p>\n

Is it easy to set up a trust? <\/h2>\n

Yes it is easy to set up a basic Bare Trust but it can lead to confusion and mistakes which can be very costly. Setting up a trust and structuring it correctly requires formal legal and financial planning, as the Settlor will lose ownership of anything put into a trust \u2013 transferring a Property to a trust is not reversible and is in effect giving the Property away so Settlors must take formal advice and fully understand the implications. <\/p>\n

What are the types of trust can a property owner create? <\/h2>\n

Depending on the purpose of the trust, there are typically seven types of trusts in the UK<\/a> with different tax structures and terms of property inheritance and asset distribution.<\/p>\n

1. Bare trust<\/h3>\n

A simple trust created where the beneficiary gets all the assets and income generated from them upon reaching 18 years of age. This can be done for children or grandchildren under the age of 18 but few know that it can be done for anyone or any age, often to conceal the beneficiary.<\/p>\n

2. Interest in possession trust<\/h3>\n

The Beneficiary has a right to the income generated from the assets (for example, rental income from a rented property) but has no right to sell or distribute any of the assets.<\/p>\n

3. Discretionary trust<\/h3>\n

The Trustee has the right to make decisions about asset management and how proceeds get distributed among the beneficiaries. The level of discretion is based on what is set out in the Trust Deed, which is why it is essential the Settlor takes advice and understands what they are setting up. <\/p>\n

4. Accumulation trust<\/h3>\n

The Trustee is allowed to accumulate income, adding to the trust’s capital value, and also make income payments as with discretionary trusts.<\/p>\n

5. Mixed trust<\/h3>\n

A flexible trust that combines the benefits of different types of trusts and their respective tax liabilities. <\/p>\n

6. Disabled or vulnerable trust<\/h3>\n

Assets added to a trust created for a child or disabled person as its beneficiaries are subject to lesser taxes and more benefits. Such a trust does not affect the other social benefits the beneficiary may be entitled to.<\/p>\n

7. Non-resident trust<\/h3>\n

A trust where none of the trustees<\/a> reside within the UK with very different taxation laws applicable. <\/p>\n

When should you set up a trust? <\/h2>\n

\"Why<\/p>\n

Depending on your needs and those of the beneficiaries mentioned in your will, you can set up a living trust, executed when you are still alive, or a will trust that comes into effect after your passing. <\/p>\n

Why should you set up a Trust?<\/h2>\n

The most common reasons to create a trust include <\/p>\n