A trust is similar to a treasure chest – it’s a safe, locked box holding valuable contents for somebody else’s benefit. The person who wants to set up the trust puts cash or other assets into the treasure chest and locks it.
The keys to the treasure chest are held by trustees (usually including the person who sets up the trust). The trustees can unlock the treasure chest, change the assets inside and distribute the contents in line with the terms of the trust.
There are three key roles within a trust – the settlor, the trustees and the beneficiaries.
The settlor, or truster in Scotland, is the person who establishes and puts assets into the trust. Settlors are usually individuals or couples.
The trustees are the people who control and oversee the trust. Anybody can act as a trustee as long as they are over 18 and have full mental capacity. Often the settlor will act as a trustee to keep an element of control over the trust.
The beneficiary of the trust benefits from the arrangement. For example, they may receive money from the trust or the right to occupy a property. Certain trusts give the trustees discretion over how and when these benefits are given to beneficiaries.
Different types of trust are subject to Income Tax, Capital Gains Tax and Inheritance Tax in different ways. The rates and allowances vary according to the type of trust and how the beneficiaries stand to benefit from it.
The Financial Conduct Authority does not regulate Taxation and Trust advice.
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