A trust is a way to manage assets like investments, money, land, or buildings. A trust generally involves the following persons:
- Settlor – The person who is willing to put his or her assets into a trust.
- Trustee – The person who wants to manage his or her trust.
- Beneficiary – The person who gains benefits from the trust.
Different types of trusts are available in the market. Let’s dig deeper to get answers to the common Trusts FAQs that will be of great help to you.
1# Why are trusts set up?
Trusts are set to meet various requirements. For example, trusts are formed for:
- controlling and protecting your family assets
- handling affairs of a person who is too young to manage or he or she is incapacitated
- passing on assets while you are still alive or dead.
2# When should you register a trust?
Registering your trust with HMRC (HM Revenue and Customs) becomes a must when it becomes an obligation for capital gains tax, income tax, inheritance tax, stamp land tax, stamp duty reserve tax, land, and buildings transaction tax, or claims tax relief.
Non-UK trusts – Registering a non-UK trust is essential when you become liable for:
- tax on UK income
- tax on UK assets
It is advisable to leverage professional advice from a tax advisor, solicitor, or a trusted company.
3# When is registering your trust not necessary?
There are many cases when you are not liable for registering your trust. These reasons include the following situations:
- Paying income tax of less than £100 on interest.
- only the beneficiary or settlor of the trust has to pay tax.
- Bare trust, a charitable trust.
- In case of a resulting trust and the assets go back to the settlor due to the fact that all the beneficiaries have died.
- A statutory trust created through legislation.
- A constructive trust imposed by a court.
- Oe if you enjoy a pension scheme which is already registered with HMRC.
- If you have to file information under the Foreign Account Tax Compliance Act (FATCA) for Common Reporting Standard (CRS) purposes
4# Are there any Parental trusts for children?
Yes, there are parental trusts for children. These trusts are set up by parents for children who are 18 and have never been married or in a civil partnership. They are not a trust type in their own right but will either be a bare trust, an accumulation trust, an interest in possession trust, or a discretionary trust.
5# Are trusts available for vulnerable people?
There are some trusts especially designed for vulnerable or disable people. These trusts are most commonly known as ‘trusts for vulnerable beneficiaries’.
6# Who qualifies as a vulnerable beneficiary?
A vulnerable beneficiary is an individual who is under 18 and whose parent has died. Or a person can be considered a vulnerable beneficiary if he is not able to handle their own matters due to a mental health condition. Or a person who is disabled can also be eligible for the following benefits:
- Constant Attendance Allowance
- Attendance Allowance
Personal Independence Payment
- Armed Forces Independence Payment
- Disability Living Allowance
- An increased disablement pension
For more information about trusts for vulnerable beneficiaries, check with a professional.
These are six important questions you must be aware of when registering for your trusts.