In most cases the basic reason for setting up a private trust is to provide for loved ones who because of their age, mental incapacity or other circumstances may not be able to properly look after assets themselves.
Trusts can also be created for tax-planning reasons and asset protection. The most usual types of trusts which can be created are:
This type of trust is not, strictly speaking, a trust at all.
An asset is held in the names of trustees, but the trustees only nominally own the assets within the trust. The real owners are the beneficiaries. Such trusts arise commonly when children are entitled to assets but they are not old enough to have legal authority to deal with those assets.
The trustees of a discretionary trust own the trust assets having absolute discretion to administer and distribute the assets and which applies to both capital and income of the trust. The beneficiaries only have a mere ‘hope’ of receiving a benefit from the discretionary trust.
The trustees are guided by a separate non-binding letter of wishes created by the ‘Settlor’ of the Trust as to how they would like the trustees to exercise their discretion.
The Settlor can also be a trustee but for tax purposes should never benefit from the trust assets themselves in any way.
The real advantage of this type of trust is in its flexibility allowing the trustees to take into account the changing needs of the beneficiaries and the tax legislation throughout the trust period.
This is a trust whereby a person (called the ‘ life tenant’) is entitled to income or occupation of a property but not to capital online task manager. Such a trust may be established in the circumstances of second marriages where there are children from a previous relationship to provide for a new partner while at the same time protecting capital for their own children to inherit in due course.
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