Trusts are a way of looking after assets (money, investments, land or buildings) for people. Find out why people set up trusts and who is involved in setting them up and running them.
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A trust is a legal arrangement where one or more 'trustees' are made legally responsible for holding assets. The assets - such as land, money, buildings, shares or even antiques - are placed in trust for the benefit of one or more 'beneficiaries'
The trustees are responsible for managing the trust and carrying out the wishes of the person who has put the assets into trust (the 'settlor'). The settlor's wishes for the trust are usually written in their will or set out in a legal document called 'the trust deed.'
Trusts may be set up for a number of reasons, for example:
There are several types of UK family trusts and each type of trust may be taxed differently. Find out more by following the link to types of UK family trusts and their tax implications.
There are other types of 'non-family' trusts. These are set up for many reasons. For example, to operate as a charity, or to provide a means for employers to create a pension scheme for their staff. Find out more by following the link below to heritage, charitable or business-related trusts.
'Trust property' is a phrase often used for the assets held in a trust. It can include:
The cash and investments held in a trust are also called the trust 'capital' or 'fund'. This capital or fund may produce income, such as interest on savings or dividends on shares. The land and buildings may produce rental income. Assets may also be sold producing gains for the trust. The way income is taxed depends on the type of income and the type of trust. Find out more by following the link below.
A settlor is a person who has put assets into the trust. This is known as 'settling' property. Assets are normally put into the trust when it's created, but they can also be added at a later date. The settlor decides how the assets in the trust and any income received from it should be used. This is usually set out in the trust deed.
In some trusts, the settlor can also benefit from the assets they’ve put in. These types of trust are known as 'settlor-interested' trusts and they have their own tax rules.
Trustees are the legal owners of the assets held in a trust. Their role is to:
The trust can continue even though the trustees might change. However, there must be at least one trustee. Often there will be a minimum of two trustees. One trustee may be a professional familiar with trusts - a lawyer, for example - while the other may be a family member or relative.
A beneficiary is anyone who benefits from the assets held in the trust. There can be one or more beneficiary, such as a whole family or a defined group of people. Each beneficiary may benefit from the trust in a different way.
For example, a beneficiary may benefit from:
If you're a beneficiary you may have extra tax to pay or be entitled to claim some back depending on your overall income. Follow the link below to find out more.
The treatment of trusts for tax purposes is the same throughout the United Kingdom. However, Scots law on trusts and the terms used in relation to trusts in Scotland are different from the laws of England and Wales and Northern Ireland.
Understanding trusts can be difficult so you may want to work with a solicitor or tax adviser. Remember though that the trustee is still legally responsible for the trust's tax affairs. You'll find some links below to professional organisations - although not all professionals are registered with them.
If you want HM Revenue & Customs (HMRC) to communicate with your agent or professional representative on Income Tax and Capital Gains Tax matters, you'll need to fill in form 64-8. Follow the link below to find out more about completing form 64-8.
If you want HMRC to communicate with your agent or professional representative on Inheritance Tax issues, you'll need to enter their details on form IHT100.