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What is a Trust

Believe it or not most of us already have one or more trusts without even realising it. A typical example would be a family home which is jointly owned by Mom and Dad. This means that they’re both entitled to all of the net value of the property, joint owners of a property or bank account have to follow certain rules, for example:

One owner can’t just sell a jointly owned house without the agreement of the other and when one owner dies the other owner automatically becomes the sole owner of the whole property, despite whatever might be said to the contrary in the deceased’s will.

So how did trusts start?

Trusts have been used to protect people’s assets since the 12th century. When a knight went off to fight in a war he would pass ownership of his lands to a trusted friend, with the lands to be handed back on his return. Often the friend went back on his word refusing to hand ownership back as under English common law he could claim the land was legally his the law was changed to prevent this and the trust was born. Nowadays trusts are no longer just for land owners, the nobility and the exceptionally wealthy but used to protect people’s assets from all walks of life, but how did this happen?

Following the end of World War II there was a massive housing shortage which was met by the building of council houses. Many will remember our parents and grandparents happily living in one. The introduction of the right to buy scheme changed things for ordinary working families who now had assets for the first time. Assets that they could pass on to their children. Assets they wanted to protect. This Remains the case today, with more people owning their own homes and even second properties. Using trusts is the best strategy for those looking to pass these assets on intact.

Although the trustees are the legal owners of the assets inside the trust, and make all the decisions the money has to be used according to the rules you set out for them to follow.

Today trusts have many uses and are not only great for protecting young dependents and vulnerable beneficiaries, but can stop unintended parties getting their hands on your money after you’re gone.

When assets are passed to beneficiaries absolutely they’re at risk of attack from divorce or separation, bankruptcy and creditors, remarriage, care costs and Taxation.

Simply setting up a trust will help protect your hard-earned money from any such attacks being made against your chosen beneficiaries no matter what their future holds so before you ride off into the sunset on your trusty steed, be your loved one’s night in shining armor by setting up a trust today.

Multiple Sibling Trusts | About Multiple Sibling Trusts

You’ve learned just how useful trusts can be. Now let’s explain why there are many good reasons for creating more than one trust. Establishing separate trusts for each child or beneficiary allows you to take their individual needs into account. You can choose the amount you wish them to benefit from and how you want them to benefit.

Say you left your three children some cash, surely you wouldn’t just dump it all into one joint bank account and just leave them together on with it. In your mind’s eye you can probably picture the fallout which would ensue. How happy do you think they’d be having to go cap in hand to their brothers and sisters for permission every time they wanted to draw some money out of the joint account, and say what they wanted to use it for. What if one of them had moved away? What if the relationship between them had broken down?

The best way would be to set up a separate account for each of them allowing them to access and manage their own inheritance as they wished.

Suppose you had one child who you didn’t think capable of making responsible investment or spending decisions you could choose for that child to receive an income for life rather than have full access to the assets.

Separate trusts are also a great way to solve those tricky who gets what issues which can arise, especially for those with blended families it’s far better to decide this while both spouses are alive rather than let the order of who dies first decide which descendants get what.

That’s great but won’t having different trusts cost much more to manage?

Actually a group of simple trusts is much more manageable than a single trust with many purposes, mixed assets and multiple beneficiaries. Don’t forget that all the trustees of any one trust must act unanimously, which means they must all agree on a course of action.

Having individual trusts and appointing a professional trustee greatly reduces the potential for arguments.

Remember when it comes to asset protection for your loved ones, more is definitely more. Speak to Legally Bound about creating trusts for your family members that are as individual as they are.

Why use a Professional Trustee?

Being a trustee carries a great deal of responsibility. Trustees need to know and adhere to the terms of the trust, and can be held personally liable for any losses made by the trust if they don’t carry out their duties properly. So it’s surprising to learn that when people set up a trust they often look to their children, relatives, and people they trust as their choice of Trustees to manage the trust assets after they’ve gone.

Baffling when you know that all of the trustees need to be in complete agreement about every decision made, and how often this leads to disputes, especially where the trustees are also beneficiaries of the trust and conflicts of interest can arise.

For example, there have been cases where the surviving parent has requested money from the trust but the trustees, their own children have refused this, picturing their inheritance being lost. Imagine having your own children in charge of how you spend your money.

When an untrained person is appointed as a trustee, decisions will be made which may not be completely in the interest of the beneficiary, or beneficiaries because they don’t have a clear understanding of the impact their decisions may have on the beneficiary’s inheritance. They could distribute funds to beneficiaries and inadvertently lose the protection a trust offers, undoing the original reasons behind the trust planning such as asset protection, and so exposing the assets to risk.

There may also be difficult and sensitive decisions to be made by the trustees. There could be beneficiaries who are financially irresponsible or at risk of wasting their inheritance. Perhaps because they have an addiction or a mental illness. Take Johnny known for his wreckless spending habits, if he asks for money to buy a new car, a trustee related to Johnny might find it difficult to refuse him, whereas a professional trustee would simply approve the purchase of a Fiat rather than the Ferrari he’d asked for. Then there’s Allison who’s in a relationship with someone likely to exercise control over any inheritance she received outright, and young Danny who is disabled and has means tested benefits. Benefits he would lose if he inherits a lump sum of money outright.

A professional trustee will ensure funds are distributed in line with the settler’s wishes in the most tax efficient manner, and with the maximum protection. They cannot be swayed by pressure from a beneficiary and take a totally unbiased approach when dealing with the deceased’s assets.

Professional trustees assist other trustees, ensuring all of them meet their legal duties and responsibilities and act in the best interests of the beneficiaries as a whole. It’s a balancing act between satisfying the request of a beneficiary while also protecting the interests of the other beneficiaries. The simple truth is that a professional trustee who does their job, keeps the trust out of trouble. Usually expensive trouble that an unqualified trustee would not have seen coming. They are like the Family Trust police.

Using a professional trustee costs money, true, but it’s important to remember why you set up the trust in the first place. If it’s not being run properly then you wasted your money, and chances are your money could end up being wasted again. If our car needed some major repairs few of us would attempt a DIY job, and would seek out a qualified mechanic to do the work in the knowledge that our car being safe to drive far outweighs the costs involved. Cheap can be expensive in the long run, why take the risk?

Appointing a professional trustee is making sure you put your money in hands you really can trust.

Marriage After Death | Trust Protection

You probably have clear ideas about what will happen to your estate when you die. First you want your money to pass to your partner, then eventually you want your money to go to your children.

Do you realise that even if you have a will what you wish for may not actually happen? How does that make you feel? Surprised? Angry? Disbelief?

Here’s what could happen following your death. You sincerely hope that your partner to find someone new, after all you want them to be happy.

Do you realise that when your partner remarries, everything you leave will become jointly owned with that new person? Consider what happens if eventually that new marriage breaks down. At least half of everything you worked so hard for could be lost in the divorce settlement. Or what if the new marriage succeeds, then your partner dies first, before their new partner. Now all your assets could be in the hands of complete strangers. If they don’t get on with your children, your kids could get nothing. Picture your children’s inheritance being spent by people you don’t even know. Do you think that’s right your children could be completely disinherited?

Simply setting up a trust alongside your will enables your partner to benefit fully from your assets, but more importantly ensures your children’s inheritance is fully protected. Make sure that that what you want to happen, actually happens. Don’t let others benefit from your hard work at the expense of your children.

Divorce of Beneficiaries | Using a Trust to Protect Assets Through Divorce

Even if you set up a will, and you have very clear ideas regarding your beneficiaries, what you’ve planned may not actually happen. Like most couples with a will you’ve bequeathed each other your entire estate and then it passes on to your children, the kids grow up, marry, and later go on to have children themselves. In later years after you both die your children will inherit all your assets. Bearing in mind that nearly half of marriages in Britain end in divorce, what will happen to their inheritance if they do separate? Your child’s partner will be entitled to at least half the money you left them. That’s not exactly what you had in mind. Your money will go to someone else, not your children, not your grandchildren. Your first thoughts might be well that’s life, there’s nothing I can do about that, unfortunately what will be will be.

This is not true, you have more power over your money, you can control what happens to it even after you’ve gone. Setting up a simple trust alongside your will ensures your money goes where you want it to go, and more importantly, it stays there with your children and your grandchildren.