How To Set Up A Trust Fund
People often make the mistake of assuming that trust funds are just for rich people. In actual fact, there are a lot of positive benefits to setting one up, giving you the chance to provide for people in your care and establishing rules to ensure the money is properly looked after. With the right approach, it is possible to effectively set up a trust fund.
Why you should set up a trust fund
There are numerous reasons why a trust fund can be useful. For example, you may want to keep money aside so your children or grandchildren can afford to study at university. It can also be a useful alternative to passing on an inheritance, reducing probate and inheritance tax costs.
Among other things, this can cover money, stocks, real estate, and other assets. The process involves three people/groups of people- the settlor (who provides what is being passed on), the trustees (who safeguard the cash, assets and so forth) and the beneficiaries (the people who will receive said trust funds, assets, etc.)
Different types of trusts
There are different variations available. What you choose depends on what you are passing on and your personal circumstances. Bare (aka simple) trusts involve passing on everything once the beneficiary reaches a certain age, while interest in possession means providing access to funds as they need it usually up to the point of death.
Some trusts involve a more active role for the trustee. With a discretionary trust, a trustee decides how much to release in order to provide for the beneficiary’s needs, while accumulation and maintenance mean the trustee can add to the fund via investments. It is possible to create a trust that is a mix of two or more of these options.
How to set it up
It is very important to have someone legally experienced to ensure the agreement is properly worded. The first step is to establish what assets are being distributed. After that, you need to choose a trustee, ideally someone outside your close friends or family as they can be neutral and make decisions in a more objective way.
You also need to consider how many people will benefit- you may choose to pass on to your children, grandchildren or distributed to both in different ways. A trust deed can then be written up- while it is strongly recommended you use someone with legal experience to write it, you are able to talk about the terms involved and what you want to see.
The main terms to include in the deed are who the trustees and beneficiaries are, what funds or assets are being managed by the trustees, how it will be managed and who will receive funds/assets once the trust is terminated (e.g., passed on to partners, children, grandchildren, etc).
Once you have established this, the deed can be signed, and the trust can be put in place.
We can help
As a long-established family firm Larcomes Financial Services has many years of experience working with families in establishing trust funds. If you would like to know more or wish to discuss creating a fund, please contact us today, and we will be happy to go over your requirements in more detail.