Setting up a trust in England and Wales provides a flexible framework for managing and protecting assets against creditors, legal cases and financial mismanagement, ensuring that your beneficiaries receive the inheritance you intended. There are a number of types of trusts largely governed by the Trustee Act 2000. A trust comprises of:
- settlor the person whose assets are put into the trust;
- a trustee or trustees, the person that manages the trust;
- the beneficiary or beneficiaries, the person who benefits from the assets in the trust.
There several types of trust and it is imperative that you seek the guidance of an expert lawyer to assist you to understand the various trusts, failing to take expert legal advice and direction with regard to best type trust for your purpose is one of the most serious mistakes that a settlor can make. The law surrounding trusts is complex and often outside the settlor's knowledge and experience.
The choice of trustee or trustees must be made extremely carefully they are the guardians of the trust and its assets and should be not be made based on personal friendships alone, it is sensible to choose trustees that have knowledge and understanding of the legal complexities and the implications of any actions that they may take. Depending on the type of trust, the trustees are often the only people who have access to the assets and control over the trust property. This access enables them to carry out their duties, such as investing assets to create income, making distributions to beneficiaries, or covering trust expenses. Appoint trustees that have the beneficiaries' interests at heart and are likely to live longer than you. The Charity Commission monitors charity trustees.
Sergio Filonenko Kibu, an associate, commented "a trust cannot be varied or amended unless there are exceptional circumstances and the consent of all parties involved is required." Sergio further stated "a deed of variation can be drafted, however if the new terms cause detriment to one or more of the beneficiaries, such as in a divorce, the family court can reject the changes.
A trust is an excellent way to safeguard assets in the event of unexpecterd financial instability, such as divorce or bankruptcy. A trust can also shelter assets aimed at supporting a vulnerable family member with limited or no capacity to manage their own financial affairs"
Giambrone & Partners commercial lawyers can evaluate your objectives and provide guidance as to the best option to meet your intentions in the disposal of your estate. The types of trust to consider are:
Bare Trusts
The beneficiary in a bare trust is entitled to the capital and the income generated from investment. If the beneficiary is under the age of majority the trustees look after the assets until the beneficiary reaches the age of 18.
Interest in Possession Trusts
The trustees pay the income arising from the assets to the beneficiaries as it is generated, minus any expenses incurred.
Discretionary Trusts
The trustees have greater flexibility to make decisions as to how the trust capital and income arising can be used. For example, they can choose which beneficiary receives payments, the frequency of the payments and they can impose conditions that they deem to be necessary. Discretionary trusts are often used for beneficiaries who are very young or are considered not to be capable or responsible enough to manage money themselves.
Accumulation Trusts
An accumulation trust allows the trustees to add the interest earned to the capital and pay out from the trust in the same way as discretionary trusts.
Mixed Trusts
As the name suggests the trust is made up of several different types of trust. Each part is subject to the applicable tax rule.
Non-resident Trusts
This type of trust is suitable for the following:
- When none or only some of the trustees and are resident in the UK
- When the settlor of the trust is either not resident or deemed to be domiciled in the UK when the trust was set up or funds were added to the trust.
Non-resident trusts are complex and must have legal guidance as well as the guidance of a tax expert.
In conclusion, trusts are an excellent way of sheltering assets and protecting an estate for the beneficiaries, however the decision to set up a trust must be taken after a great deal of thought and with the full understanding of all the implications.
The recent attempt by Rupert Murdock and his son Lachlan to amend the family trust, not to disinherit the other three children but to enable Lachlan to have sole control of his media empire, News Corp and Fox News, when Rupert Murdock passes away. Mr. Murdock believes that Lachlan is empathetic to his own thinking and will continue his policies. The court denied the attempt to change the trust saying that Mr. Murdock and his son acted in bad faith.
Sergio Filonenko Kibu is an Abogado (qualified Spanish lawyer) and is admitted to practise in England & Wales as a Registered Foreign Lawyer (RFL). He is an associate based in the London office.
Sergio assists commercial clients with a range of contentious and non-contentious matters. He is a highly regarded, astute lawyer advising on challenging cross-border disputes, including debt collection, contractual disputes and breach of contract. Sergio advised on a complex high-value international financial disputes across several jurisdictions. He also assists businesses with drafting shareholder agreements, share purchases, mergers and acquisitions and security agreements.
Sergio has extensive experience assisting high-net-worth individuals with the acquisition of real estate, both residential and commercial, in excess of €10 million across the globe. Sergio's meticulous due diligence, with regard to large commercial real estate transactions, ensures that the investment is sound and also limits the exposure to risk, providing an outcome in line with the clients' objectives. He is also able to assist with regulatory issues surrounding such investment.
He aso leads the Ukrainian division and is assisting Ukrainian clients with immigration applications for visas for Ukrainians with family members in the UK, as well as applications for visas for Ukrainian citizens wishing to join their relatives in Italy, Spain, Portugal. Sergio will guide the applications working closely with each country's government department to accelerate the visa applications.
Furthermore, Sergio can advise private clients on inheritance, trusts to protect your assets, drafting wills for foreign nationals with overseas assets including Spanish real estate, he can also assist with probate and inheritance disputes. Sergio also advises on cross-border divorce, establishing the financial and child arrangements. With regard to criminal defence Sergio has assisted British nationals arrested in Spain for various offences.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
