What is a Trust?
A Trust is a legal arrangement which involves a person, the “Settlor”, transferring legal title to assets to another person or body, the “Trustees”, to hold for the benefit of one or more persons, (the Beneficiaries), which may include the Settlor. There are many advantages to setting up a trust including mitigating tax and estate planning.
There are many types of trust which can be set up during the Settlors lifetime by way of a Trust Deed or upon death made under a Will. In a lifetime trust assets are then transferred to the Trustees.
What happens when I die?
The assets held by the Trustees will not form part of your estate, and will continue to be held for the remaining Beneficiaries as set out in the Trust Instrument, so there is continuity. The Trustees will take into account any wishes you may have expressed as to what you would like to happen after your death. The Trust can be ended by distributing all the assets to the Beneficiaries.
Tax treatment of Trusts
Different trusts are treated in different ways for tax purposes. It is vital when setting up a trust to obtain expert tax advice. Depending on the type of trust, when income and capital gains arise in a trust tax might be charged on the trustees, the beneficiaries or the Settlor.
Personal Injury Trusts
A Personal Injury Trust is a legal arrangement whereby Trustees of your choice act as guardians of your personal injury monies. Monies that can be held in Trust are monies that you have received as a consequence of your personal injury. Typically this may include damages awards, accident related insurance policies or charitable donations.
The setting up of a Personal Injury Trust can protect the claimant’s eligibility to means tested benefits whilst allowing them to benefit fully from their compensation. This means they can keep both their means tested benefits and their award, provided benefit rules are adhered to.
If you and/or your partner currently receive state benefits or believe that in the future you may need to make a claim then it is highly advisable to seek guidance as to whether a Personal Injury Trust may be beneficial for you.
