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Trust Funds

Set up a reliable trust fund with an independent financial adviser.

Trust fund advice is a complex area that can apply to individuals (particularly minors), corporations and charities to safeguard and invest money. This specialist domain is largely about ensuring the security of the beneficiaries and it also has potential for tax efficiencies. The setting up and management of trust funds can be linked to any aspect of our Financial Planning process, and we work with relevant professionals to ensure legal compliance.

(Please note: The Financial Conduct Authority does not regulate: Estate and Tax Planning.)

What is a Trust Fund?

A trust fund can be used to manage assets on behalf of a range of people in a variety of different scenarios. They can be quite complex and the way in which they are taxed differs according to the particular situation, so it is important to seek advice if you are considering setting up a trust.
A word about the terminology: the ‘settlor’ puts assets into the trust via a ‘trust deed’; the ‘trustee’ manages the trust; and the ‘beneficiary’ reaps the benefit of the trust. Trusts may be established to protect family assets, perhaps in the case of minors or family members who are incapacitated. They may be used to pass on assets when you die but can equally be used while you are still alive, and would also be used if someone dies without a will.

What types of trust funds are there?

Bare trusts
These are trusts which are held in the name of a trustee, so the assets are guaranteed to go to the intended beneficiary, to be accessed when the beneficiary is 18 or over (England and Wales) or 16 or over (Scotland). Bare trusts are most commonly used to pass on assets to young people.

Interest in possession trusts
Trust income, say interest from shares, is passed on to the beneficiary as it occurs. The beneficiary, however, does not have any rights to the shares themselves.

Discretionary trusts
Trustees have certain powers in the decision-making process as to how income and capital are used. They are most common in cases were assets need to be put aside for future needs such as grandchildren or beneficiaries who are incapable of handling money. The trust deed will state the decisions trustees can make, in terms of whether income or capital gets paid, to whom, how frequently and any conditions.

Accumulation trusts
Trustees can gain additional income within the trust and add it to its capital. It may also be possible to pay out income.

Mixed trusts
A variety of different types within one trust, with the relevant tax rules applied to each part.

Settlor-interested trusts
This is a type of trust where you or your spouse/civil partner benefits, particularly useful in situations where you are incapacitated and can no longer work.

Non-resident trusts
This relates to residing outside the UK for tax purposes, and is extremely complicated in terms of tax rules.

Beneficiaries of bare trusts must declare their trust income on a self-assessment tax return. Trustees, on the other hand, are responsible for paying income tax relating to accumulation or discretionary trusts. They must also pay tax on all dividends, as they do not qualify for the dividend allowance introduced in April 2016. Dividend-type income is taxed at a different rate from all other income, and tax also varies whether dealing with the first £1,000 or beyond £1,000 of income. It is important to consider all the tax implications when planning to set up a trust.