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What are the benefits of setting up a family trust fund?

Setting up a trust is a sensible way to ensure that your money and assets are protected and that you are able to leave everything to the people that you have chosen after you have gone. There is often a misconception that trust funds are only used by the very wealthy, but they can be very useful for anyone with a reasonable amount of money that they want to protect. Trust funds are designed to allow a person’s money to continue to be useful well after they pass away, and setting one up is likely not out of financial reach.

Setting up a family trust fund

Setting up a family trust fund UK can initially seem daunting, but there are essentially three roles that exist within a trust. Each of these roles has different rights and responsibilities. The three roles within a Trust are:

  • The ‘Settlor’, who puts the assets into the Trust,

The Settlor is also able to decide how any assets in a Trust should be used. They will usually have to confirm this in a legally binding document called a ‘Trust Deed.’

  • The ‘Trustee’, who manages the Trust

They are the legal owners of any of the assets that are held within the Trust, and they must carry out any dealings in line with what the Settlor has written in their Trust Deed or Will. Trustees also have the responsibility to pay any tax due from the Trust. There can be multiple Trustees, but there must always be at least one.

  • The ‘Beneficiary’, who benefits from the Trust

Beneficiaries can benefit from either the income from a Trust, the capital from a Trust, or both. The income might be rent from a property included as an asset in the Trust, and the capital might be a share in the value of a Trust when they reach a certain age. There can be multiple beneficiaries included in a Trust.

It is always worth carrying out detailed research into the type of trust that would be best for you, because there are a number of different trusts that exist, including:

  • Bare Trusts
  • Interest in Possession Trusts
  • Discretionary Trusts
  • Accumulation Trusts
  • Mixed Trusts
  • Settlor-interested Trusts
  • Non-resident Trusts

Specifically for family trusts, you can choose to set up:

  • Bare trusts
  • Interest in possession Trusts
  • Discretionary Trusts

What is inheritance tax?

Inheritance tax UK is the tax that you must pay on the estate of someone who has died, including all property, possessions and money. There is normally no tax to be paid if:

  • The value of your estate is below the Nill Rate Band (NRB) of £325,000, or
  • You leave everything above the threshold to your spouse or civil partner, or
  • You leave everything above the threshold to an exempt beneficiary such as a charity

In terms of setting up a family trust fund, this will benefit you in that it will likely reduce the amount of tax that will be attached to that which you leave behind if it is within a trust.

What about probate services?

Probate is something else that wil need to be considered in the proccess of sorting out your will and setting up a family trust fund. Probate services will be able to provide you with the assistance to deal with the legal process of dealing with your estate. As with a number of different elements of wills and trusts, it can be complex to deal with probate, and you should always seek the advice of experts.


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