Trusts

A trust is a legal arrangement where one person (the settlor) transfers assets to trustees to hold for the benefit of beneficiaries. Trustees own the assets legally but must use them according to the trust terms for the beneficiaries’ benefit. Trusts separate legal and beneficial ownership, providing control, protection, and tax advantages. They’re used for estate planning, protecting vulnerable beneficiaries, minimising tax, and preserving family wealth across generations.

Common types include discretionary trusts where trustees have discretion over distributions, bare trusts where beneficiaries have an immediate fixed entitlement, interest in possession trusts where beneficiaries have rights to income, and accumulation trusts for children. Will trusts are created in Wills and take effect on death. Lifetime trusts are created during the settlor’s lifetime. Each type has different tax treatment and suitability for different objectives.

Assets transferred into a lifetime trust are generally outside your estate for Inheritance Tax purposes, provided you survive seven years after creating the trust and do not retain any benefit from it. Will trusts can preserve both spouses’ nil rate bands for married couples. Discretionary trusts have their own tax regime including periodic and exit charges. Whether trusts provide an overall tax saving depends on your specific circumstances, and we advise on this before recommending any structure.

Trustees must be trustworthy, responsible, and willing to act. You can appoint family members, friends, or professional trustees such as solicitors or accountants. Many trusts combine family and professional trustees to balance personal knowledge with legal expertise. Trustees have legal duties including acting in beneficiaries’ best interests, following the trust terms, investing properly, keeping accounts, and filing tax returns. We can act as professional trustees or advise on appropriate appointments.

Yes, but it can have tax implications. Being a trustee of your own lifetime trust may mean assets remain in your estate for Inheritance Tax purposes if you retain too much control. Careful structuring is needed if you want to be a trustee while still achieving Inheritance Tax savings. For Will trusts, you cannot be a trustee as the trust only starts when you die. We advise on the right structure for your objectives.

Trustees must act in beneficiaries’ best interests, follow the trust terms, invest trust assets properly, keep accounts, file tax returns, and distribute income or capital as required. They have a duty of care and can be personally liable for breaches. Trustees must act unanimously unless the trust deed permits otherwise, avoid conflicts of interest, and keep beneficiaries appropriately informed. We provide trustee training and ongoing support to ensure obligations are met.

Disputes over trusts, including claims about beneficial interests, trustee conduct, or the validity of a trust, are handled by our specialist Litigation & Dispute Resolution team. See our Contentious Trusts and Probate page for further information on how these disputes work and how we approach them.