Trusts can be created by either a will, deed or a lifetime gift. In a lifetime gift, the terms of the trust must be set out in a trust document. This will mean that the trust will then start on the date stated in the trust document. If the trust is created by a will, then the trust will begin on the date of the testator's death. Where money or assets are held by trustees on behalf of a person or group of people then this is a trust so long as it follows the following conditions: the person who has created the trust must make their intentions clear; the money or assets that are to be held on trust must be clearly defined; and the person or group of people who are to benefit from the trust must be stated clearly.
It is common for some people to use a will to create a trust for any minor children that they may have. This will mean that the executors and trustees named in your will, would be the legal owners of the property or investments and, under the provisions of the will, would have a duty to look after the property or investments on behalf of the minor children in question until the child reaches the age of 18 or whichever age has been specified in the will by the testator. In this time, the investments would be transferred to the children that are named in the will.
Another type of trust that is found to be written into a will is where the executors and trustees named in the will would hold the property or investments in trust and then pay the income to the beneficiary named in the will for their lifetime. That beneficiary is known as a life tenant. Once the beneficiary has been paid the income to the beneficiary for their life time, the capital will then be paid to other beneficiaries named in the will. These beneficiaries are known as remaindermen.
Trusts can be created by lifetime gifts of assets or money which will be pets, or otherwise known as potential exempt transfers, coming in the forms of trusts for disabled beneficiaries or untaxed because the sum given to the trustees is within the nil rate band of £325,000 and therefore it is a way of avoiding paying any inheritance tax in the long run. Therefore it is a good idea to get a hold of your insurance or pension policies if you have any to see what happens to you if you die, as there can be inheritance tax benefits if the money from the policy is paid to a discretionary trust rather than to the estate on the testator's death.
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