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Learn about trusts

A trust can be an important element of good financial planning, but if you are new to them they can appear complicated. The following information will help you get to grips with the basics of a how a trust works, why you would use one and who needs to be involved.

What is a trust?

A trust is a legal arrangement that lets the owner of something 'gift' it to someone else. This could be an investment, cash, a life policy or a home.

You can choose who can benefit from the trust assets, as well as how and when your wealth is distributed.

There are different kinds of trusts available and each may be taxed differently so it’s important to speak to your financial adviser about setting up the right trust for your needs.

Why have a trust?

Setting up a trust can be a good idea if you want:

  • peace of mind that the money will be paid to the right person at the right time. For example, you may want to put some of your savings aside in a trust for your children or grandchildren
  • to pass on wealth quickly and easily. By putting assets into a trust, they no longer ‘belong’ to you so there is no need to wait for probate which can sometimes take several months
  • to help with inheritance tax planning. Some trusts can be used to help reduce the value of your estate if you survive seven years after setting it up.

It’s important to remember, if a policy is written in trust, you may not be able to change your mind and take the policy back out of the trust. This is different to making a will, where you can change the terms throughout your life as your circumstances change.

Who is involved in the creation and management of a trust and who can benefit?

There are three key people involved in any trust:

  • Settlor - This is the person who set up the trust. In other words, you.
  • Trustees - The trustee or trustees are the people who will manage the trust. This can include you.
  • Beneficiaries - The person or people who will benefit from the trust.

Your financial adviser can help you understand any implications and guide you through the most suitable solution.

Next steps

Contact your financial adviser to discuss how a trust could be right for you.

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