A trust is a legal arrangement by which a person (the settlor) gives control of their money/assets to another person or group of people (the trustees) to manage for the benefit of another/others (the beneficiary).

The purpose of a trust is for estate planning, protecting assets, and managing wealth across generations.

A beneficiary in a trust is a person (or a group of people) chosen by the settlor to receive the benefits from the assets held in the trust. The settlor may also be named as a beneficiary (a settlor-interested trust) if that is the case.

Beneficiaries can include:

• Family members
• Friends
• Nonprofit organisations
• Charities
• Businesses

In general, the setting up of a trust includes the following steps:

1. Decide on the type of trust
2. Choose a trustee
3. Decide on beneficiaries
4. Draft a trust deed
5. Asset transfer

Administered under strict rules relating to tax and the law, it’s a good idea to seek qualified legal advice when setting up a trust. With Wellers, our expert solicitors will help you understand the type of trust to set up based on your needs, choose suitable trustees, and determine the beneficiaries. A legal document called a trust deed will then be drafted, in which it’s essential that your wishes are clearly defined. Assets, such as money, property, shares, etc., will then be transferred into the trust.

Common types of assets that can be put in a trust include:

• Property: your home, rental properties, owned land/buildings
• Money
• Investments: stocks, shares, and bonds
• Business ownership
• Life insurance policies
• Pension funds and retirement accounts
• Valuable items: jewellery, art, collectables
• Intellectual property: patents, copyrights, and trademarks
• Family heirlooms and sentimental items
• Online accounts and digital property

Any asset with value can be placed into a trust. As trusts can easily become liable to challenge, it’s essential to carefully consider the terms of the trust and ensure everything is set up correctly and in line with the law, with the support of legal advice.

The cost of setting up a trust in the UK varies depending on the type of trust, the legal and financial services involved, and the overall complexity of the trust, i.e., what is included within it.

If there is potential for inheritance tax issues with your trust, you may need advice on mitigating this, which may also increase the cost of setting up the trust.

At Wellers, our experienced trust lawyers are here to provide expert guidance and support throughout the process, addressing any questions you may have regarding trusts.

There are several tax implications to consider when setting up a trust, all of which our specialist solicitors can help you to understand. Key tax considerations include:

• Inheritance Tax (IHT): If the value of the assets transferred into a trust exceeds the annual gifting exemption limit, IHT may be payable.
• Income Tax: Trustees will need to pay income tax if the trust generates income (i.e., through interest, rental income or dividends).
• Capital Gains Tax (CGT): If assets in a trust are sold or distributed to beneficiaries, they may also have to pay CGT on the gain.
• Stamp Duty: If the transfer of property or land is included in the trust, stamp duty could apply.

Having a trust lawyer’s expertise when setting up a trust will ensure that all tax implications are considered when creating and administering the trust.