What Is A Trust Fund?
A trust fund, often referred to as a trust, is a legal arrangement that protects your assets. There are two types, one takes effect after you die, the other can be used whilst you are still alive.
What Goes Into Them?
It is usually property and money that is put into trust and there are many different reasons for doing this. An example of this is that you can protect assets for children, until they reach an age where they are old enough to receive them.
There are many different types of trust funds, that are designed to meet a variety of needs. Examples of these include a Flexible Life Interest Trust, Discretionary Trust and Disabled Persons Trust. Consequently, you may require one or more different trusts depending on what assets you are going to put into them, who your beneficiaries are, and how you wish your assets to be distributed among those beneficiaries.
You can use a Trust fund for many reasons, and these offer a range of advantages.
- Protecting property until children reach an age where they are legally able to take possession of it
- Stop your property being sold to pay for care homes
- Reduce inheritance tax liability
- To protect children from ‘side-ways disinheritance’
- To provide for a spouse whilst keeping inheritance intact for children and future generations
If you choose to create a trust for your assets you will need to appoint trustees. You can choose between one and four trustees, and it is usually best practice to appoint two. You may appoint the same people that you have chosen to be your executors, or the guardians for your children.
How Do I Choose?
While choosing trustees, think about the following questions…
- Are they an honest and trustworthy person?
- Do they have the best interest of the beneficiaries at heart?
- Do they have any experience in dealing with financial matters?
- Would they be willing to act as a trustee?
- Will they outlive me?
Additionally you should appoint alternatives as a back-up because your chosen trustees might be unable to carry out their duties. For example they may be suffering from an illness that prevents them acting or they may have already passed away before you. Of course you could also appoint professional trustees to act on your behalf too.
Trustees are responsible for day to day running of the trust. Most noteworthy their powers and duties are defined by law, meaning they must manage the assets in the best interests of the beneficiaries.
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