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Trusts provide a flexible structure for protecting family assets. Often they are essential for constructive tax planning. They can equally be useful in preserving family assets in a wide range of circumstances - children not yet mature enough; fragile marriages; physical and mental deterioration with age; unexpected windfalls.
The essence of a trust or "settlement" is that designated people (the "trustees") hold property given by a "settlor" on behalf of others (the "beneficiaries"). Virtually any property can be put in trust: land, shares, money, insurances, chattels and other personal assets. There can be wide flexibility as to who are the beneficiaries, when or whether they are to receive any benefit, and how much that benefit will be. Their interest can be limited to the right to receive trust income or occupy trust property, so that the underlying trust capital is preserved within the trust; trusts of this sort are known as "life interest" or "interest in possession" trusts.
By contrast, under a "discretionary" trust a class of potential beneficiaries (e.g. family members) is defined but with no right to call for any benefit. It is left to the trustees to decide if and when any particular member of the class is to receive either all or part of the income or capital. There are many other types of trust, one example being the "accumulation and maintenance" trust tailored to the inheritance tax rules. Here, broadly, children form a discretionary class until they reach 25, at which point they receive a definite interest - though this need only be a right to income, as opposed to outright ownership of capital.
Trustees are in a powerful position. Choosing the right people, whether from within the family, friends, or professionals, is vital. They will often be guided by wishes expressed by the settlor, though decisions ultimately rest with them.
The initial structuring of a trust needs care, skill and experience. It must achieve the underlying purpose, provide the right flexibility, avoid constraints imposed by law and stay within complicated tax requirements.