Trusts

The term "Trust" refers to the legal relationships created (in lifetime or on death) by a person (known as the Settlor) when assets have been placed under the control of a trustee for the benefit of a beneficiary.

There are three major types of Trust:

• Discretionary Trusts
  The trustees of a discretionary trust have discretion as to when to pay the trust income and capital to the beneficiaries.
  
  
• Interest in Possession Trusts
  Until the recent changes to the Inheritance tax treatment of trusts, the interest in possession trust was frequently used. The trustees have a duty to pay the income of the trust to the interest in possession beneficiaries and quite often the trustees would also have been given a discretionary power to bring that right to income to an end and distribute the trust capital to other beneficiaries.
  
  
• Accumulation and Maintenance Trusts
  Until the recent changes to the Inheritance tax treatment of trusts, A&M trusts were frequently used. These trusts were set up for the benefit of infants until they typically reached the age of 25 when they normally became entitled to the trusts capital. Until that date, the trustees would manage the capital, spending the trust income on the beneficiaries if it was desirable and saving it for them if there was no reason to distribute it.
  
  Although there are many other variants of trusts, Pilot Trusts, Bare Trusts, Business Property Relief Trusts etc, they are variants of the three above and are certainly well worth considering to protect your family or business and loved ones from third party interests. However careful consideration must be given to the tax liabilities and restrictions that may apply.