What is a trust?
Trusts are used extensively to provide tax and practical benefits.
A trust is created when a person (the settlor) transfers assets such as shares, property or cash to trustees for the benefit of their chosen beneficiaries.
A trust can be established by ‘Deed’ during the settlors lifetime, or can be included in a ‘Will’ to take effect on the settlors death.Advantages of establishing a trust
A trust can provide various tax and practical benefits:
In certain circumstances, a trust can provide significant income tax savings, for example:
Mr ‘X’ is a higher rate taxpayer. He wishes to make a gift of an investment property to his three grandchildren and decides to settle it on a discretionary trust. The property produces a rental income of £10,000 per annum.
Mr ‘X’ would normally pay tax on the income at the rate of 40%. The trustees will instead pay tax at 45% on most of the income.