What Exactly is a Trust?
Most people have heard of Trusts but have no idea of exactly what they are or how they work in practice.
It is in fact a formal transfer of assets (property i.e. “bricks and mortar”, shares, cash and so on) from the Settlor (the person giving the assets to the Trust) to a small, specially selected group of persons known as Trustees. These people need to be chosen with great care as they are to be entrusted with valuable assets and must be sufficiently trustworthy to do with those assets EXACTLY what is called for within the Trust instrument (document). They are then given instructions that they are to hold these assets, whatever they may be, for the benefit of others (who are named). If such a Trust is made during your lifetime, to take immediate effect, it is usually accompanied by a Trust Deed, and often referred to as a “settlement”. If it is to be created on or shortly after your death, then it must be directed and detailed within your Will.
Whichever is the case, the Trust instrument will state who will be responsible for looking after the gifted assets (i.e. the Trustees), who is to benefit from those assets (the Beneficiaries) and any conditions or rules to which the Trustees or Beneficiaries must adhere.
The unique concept of a Trust is that the legal ownership and beneficial ownership of the assets, which is usually inseparable, is separated within a Trust. The Trustees are the legal owners, but the beneficiaries are the beneficial owners.
Trusts can last for as long as you want them to last, but the period must be stated within the Trust document. It could be for just a few years, or during widowhood or until a child attains a certain age or gets married. They can be a maximum of 125 years long, which enables several generations of beneficiaries to obtain a potential benefit. However, Trustees should always be given the right to wind up a Trust at their discretion.
Lifetime settlements in to Trust can include the Settlor as Trustee and he/she can also appoint his/her spouse or partner alongside so that maximum control over all decision making with regard to Trust assets remains in their control.