If you or someone you know is likely to require care in the coming years, it may be a good idea to set up a trust.
Setting up a trust can be a beneficial method of securing your financial assets during uncertain circumstances. They can ensure that your money is used for a pre-defined reason such as education, care, or financial support for your loved ones.
To help you learn more about trusts, we here at My Care My Home have conducted in-depth research to divulge how and why you may wish to set one up.
In simple terms, a trust is a legal arrangement in which an individual is assigned control over assets to be used for the benefit of others. Trusts are particularly useful in care situations as they can be used to ensure that financial assets are used to cover care costs.
Anyone can hold a trust, provided that they are over the age of 18. There are multiple types of trust, each applicable to certain scenarios. All trusts must be set up with a trustor (the person setting up the trust), trustee (the person responsible for the trust), and a beneficiary (the person benefiting from a trust).
There are seven main types of trust to be used in the UK:
A Bare Trust is the least complicated form of trust. They are typically used in situations where money is set aside for children who are unable to access it due to age restrictions. Having said this, they can be used for other reasons such as gifting.
Interest in Possession Trusts
This type of trust gives a beneficiary the right to any capital assets contained within a trust after the trustee has died. Due to their nature, these types of trust are more commonly found within wills.
Discretionary Trusts provide trustees with the power to decide how the capital and/or the income generated from a trust is used; such as covering a beneficiary’s care costs later in life.
An Accumulation Trust is governed similarly to a Discretionary Trust. However, trustees are able to accumulate income within the trust and contribute that income to the trust’s capital.
A Mixed Trust is a combination of more than one type of trust.
These trusts are for when the creator of a trust (the settlor) could receive benefits from the trust in numerous formats.
This trust is used when the trustees are not UK residents.
Whether you’re setting up a trust fund for a child or putting financial measures in place for care reasons, it is highly advised to seek both independent financial advice in addition to professional guidance from a qualified solicitor.
Establish Your Goals
Outlining what you wish to achieve with your trust is the first step in creating one. Are you looking to pay for your care? Put money aside for your children? Or simply protect your assets? All of these objectives can be met with a trust.
Find a Solicitor
Trusts are legally binding agreements, which is why it is so important to ensure that they are written correctly. Only a professional solicitor is able to ensure that there are no legal issues with your trust, so be sure to seek their guidance before committing.
Selecting a Trustee
A trustee is the individual held accountable for a trust and how it is used. It is a major responsibility that should be handled by someone dependable. In some circumstances, banks or companies can be elected as a trustee, albeit at a cost.
The circumstances by which a beneficiary will receive the capital or income from a trust varies on a case-by-case basis. For example, a child may receive assets from a Bare Trust when they turn 18 years old. These are referred to as ‘triggering events’.
Once a triggering event occurs, a beneficiary can receive their assets either as a lump sum or through smaller continual payments.
As with any legal proceeding, setting up a trust can be a costly procedure. This is due to various solicitor’s fees that can increase the overall cost of arranging a trust.
The average cost for setting up a trust in the UK comes at around £1,000. However, it is worth considering that the fees involved with setting up a trust can be recouped over time due to the various tax-saving benefits that trusts can provide.
If you’re still unsure on trusts, get in touch with our expert team today. Thanks to our years of experience, we can connect you with the necessary professionals and advise on how a trust could pay for many aspects of care. Simply call or email us today to talk to a friendly expert.