LEGAL CORNER: A trust is not just for the rich, it could benefit anyone

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TRUE or false – trusts only affect the very rich?

In fact nothing could be further from the truth.

In simple terms, a trust is a legal arrangement where one group of people (trustees) are given responsibility for assets for the benefit of another group of people (beneficiaries).

A trust might be created to minimise or avoid Inheritance Tax, to protect family assets against care home fees, to protect damages awarded by the court to an injured person or to ensure that a vulnerable dependent is provided for into the future.

Some people even choose to set up a charitable trust to benefit a cause close to their heart after their death.

In short, trusts are not so much the preserve of the very rich, but are a way in which, in certain circumstances, ordinary people can protect their assets and go some way to ensure that those assets benefit the people or causes they care about most.

Questions and answers:

Q: I am a widow in my 80s. I have one grown-up child who is not happily married and three grandchildren.

Is there any way I can ensure her inheritance is protected should she divorce and/or end up reliant on means-tested benefits?

A: You could consider creating a Discretionary Trust for the benefit of your daughter and your grandchildren.

By so doing, the trustees would be in a position to deal with your estate and advance money to your daughter and/or your grandchildren in such a way that neither her ex-husband nor the State could consider the trust fund as an asset to be taken into account.

You can make your wishes clear, to your appointed trustees, in a Letter of Wishes to guide them in the exercise of their discretion.

Q: I have no dependents and an estate worth a substantial
amount of money. I want to benefit local good causes when I die, but am reluctant to leave my estate to a mainstream charity because of the administration costs and because they would be unlikely to have the local focus.

A: You could set up a charitable trust and make very clear what you want to achieve.

Your trustees would administer the trust after your death in accordance with your wishes.