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TRUSTS

A trust is a device which makes it possible to separate legal ownership of a thing from the right to use that thing or, if it produces income, the right to receive its income. The person who owns the assets in a trust is called a trustee and the person who has the use of the assets is called a beneficiary.

 

Here are some examples of how trusts can be useful:

 

Children

If parents die at an early age leaving small children they will normally want to leave their estate to those children. However the children will be too young to manage the fund and in fact from a legal point of view, they will be incapable of doing so. The fund will have to be held by trustees until the children reach a responsible age. During that time the trustees will look after the investments, they can use the income to help with the children's education and so forth, and they can also advance capital to help the children if they think that the purpose for which it is intended is sensible.

Disabled Beneficiaries

The most effective way to provide for a disabled beneficiary particularly if they are suffering from a mental disability, would be to establish a trust so that trustees will hold the capital and will use the income for the benefit of the disabled beneficiary.

Spendthrift Children

Not everyone is good at handling money; we all know families in which one member is constantly getting into financial difficulties. A trust can ensure that the capital that would normally be given to the spendthrift beneficiary is held by trustees who will look after it and can make sure not only that the fund is used to provide maximum benefit for the beneficiary but maybe to preserve the capital so that it might also benefit the beneficiary's dependants.

Second Marriages

David and Julie are married to each other but both have children by their previous marriages. David wants to provide properly for Julie if he dies first but he also wants to ensure that his children by his first marriage get a proper share of his estate. The solution is for David to leave his estate or part of it in trust for Julie so that she can have the use of the estate or its income for the rest of her life if David dies first. However on Julie’s death the capital of the Trust Fund will go to David's children.

Tax Planning

Trusts are often used for tax planning purposes, for example a discretionary trust can enable a beneficiary to have the use of assets or to receive their income without those assets being treated as part of their estate for Inheritance Tax purposes.

 

Types of Trust

There are three basic types of trust:

Contingent Trusts

Trusts where assets are held on trust for someone until something happens. The most common example of this is where a fund is held for a child until he or she reaches 21 or some other age.

Interest in possession trusts

This is a simple form of trust under which a particular person or persons have a right to have the use of trust assets or to receive their income for a certain period (normally until they die) and then some other specified person or persons are entitled to the capital.

Discretionary Trusts

Under a discretionary trust, instead of there being a particular beneficiary entitled to income and a particular beneficiary entitled to capital, there is a class of potential beneficiaries and the Trustees can allow any member of that class of beneficiaries to receive the income from the Trust Fund or to have the use of assets in the trust. The Trustees can also pay out capital to any member of the class of beneficiaries. A discretionary trust is useful because it provides maximum flexibility.

 

 

 

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What is a Lasting Power of Attorney?

An LPA is a legal document that you (the Donor) make using a special form. It allows you to choose someone now (the Attorney) that you trust to make decisions on your behalf about things such as your property and financial affairs or health welfare at a time in the future when you no longer wish to make those decisions or you may lack the mental capacity to make those decisions yourself.

An LPA can only be used after it is registered with the OPG.

The types of LPA

There are two different types of LPA:

This might be easier for lots of reasons: you might find it difficult to get about or to talk on the telephone, or you might be out of the country for long periods of time.

You can decide to give your Attorney(s) the power to make decisions about any or all of your property and financial affairs matters. This could include paying your bills, collecting your benefits or selling your house. 

Who can make an LPA?

Anyone aged 18 or over, with the capacity to do so, can make an LPA appointing one or more Attorneys to make decisions on their behalf. You cannot make an LPA jointly with another person; each person must make his or her own LPA.

People involved in making an LPA

The following are the different people involved in making an LPA: