What is a trust?
A trust is a way of holding assets (money, land & buildings and investments) for the benefit of another person. Essentially, one or more “trustees” are appointed to be legally responsible for holding assets in behalf of one or more “beneficiaries”. The trustees are responsible for ensuring that the wishes of the person placing the asset into trust are complied with.
Why set up a trust?
There are many reasons to set up a trust. Probably the most common reason is to protect assets for someone who is too young to handle their own affairs, so for instance, a trust could be set up which is to pay out when a child reaches the age of 18 or 21. A trust can also be used to protect one’s assets – for example to protect them from tax liability or from creditors.
A trust also allows rules to be put in place. The beneficiary of the trust must comply with these rules in order to receive the ‘benefit’ which has been conferred to them. So a charity trust could be created to pay financial support to exceptional scholars or only to pay out if the beneficiary meets certain criteria.
Trusts can also be used to generate income. Land and buildings placed in trust may generate rental income and investments and savings held in trust may generate dividends or interest.
What is a trustee?
Trustees are the legal owners of the assets held in trust. A trustee can be a person or a company. There must be at least one trustee, but the individuals or companies appointed can change.
They are responsible for:
- Dealing with the trust’s assets
- Complying with the wishes of the person who created the trust.
- Investing the trusts assets or otherwise generating income.
What is a beneficiary?
A beneficiary is the person for whom the assets are held in trust. A trust can be for the benefit of a specific named beneficiary, for a group of persons or for a class of people.