What is a trust?
A trust is an obligation binding a trustee (which can be an individual or a company) to deal with assets - such as land, money, shares or even antiques - for the benefit of one or more ‘beneficiaries’.
The people who run the trust, and in certain circumstances make decisions about how the assets in the trust are to be used, are known as ‘trustees’.
Trustees carry out the wishes of the person who has put assets into the trust. This person is known as the ‘settlor’.
The settlor’s intentions for the trust are usually expressed in a legal document called a ‘trust deed’ or in their Will.
What is the purpose of a trust?
UK family trusts may offer a means for people to pass their wealth on to other people they have chosen. As such, they may be used to control and protect family assets.
If a Will establishes a trust, this may allow people to pass on their assets in accordance with their wishes when they die.
A trust might be created in various circumstances:
- when someone is too young to handle their affairs
- when someone can't handle their affairs because they are incapacitated
- to pass on money or property while you are still alive
- under the terms of a Will - referred to as a ‘Will Trust’
- according to the rules of intestacy, when someone dies without leaving a Will (England and Wales only)
There are other types of ‘non-family’ trusts. These are set up for a variety of reasons, for example to operate as a charity, or to provide a means for employers to create a pension scheme for their staff.