Trusts are used for many different purposes but have often been treated with suspicion by legislators and HM Revenue & Customs. In reality, they are most often used to protect those who are most vulnerable in society and should be treated as such.
The age of legal capacity in Scotland is 16 years old. Nonetheless, many parents may consider this age to be too young for children to handle financial matters on their own. Miller Hendry are regularly involved with assisting clients in setting up Lifetime Trusts or including appropriate Trust provisions within their Wills so that assets are managed on behalf of people who cannot, or should not, own assets themselves.
Samera Ali, a Solicitor in Miller Hendry’s Perth office confirms, “A Trust is established under a Deed of Trust or within a Will and appoints the Trustees, identifies the beneficiaries and sets out the terms and conditions on which the Trustees are to hold the property. The idea behind a Trust is not necessarily to make assets unavailable to the beneficiaries – Trustees are often given scope to apply income and capital before the beneficiaries become fully entitled to the Trust funds i.e. payment of school fees. In many circumstances, the idea behind a Trust is to protect assets until children reach an age where they will be mature enough to handle matters on their own. Whilst individual circumstances will determine what age this may be, the popular ages tend to be 18, 21 or 25 years.”
Trusts can also be of great assistance when passing assets on to adult children. If a child were to divorce, then their spouse could make a claim for a financial provision. Whilst strictly speaking, the inheritance is not matrimonial property within the terms of the legislation, if it is in some way converted or used as matrimonial property, it could be subject to a claim. A Trust is a useful way to ensure that assets do not pass to people outwith the immediate family. Likewise, if a child were to get into financial difficulty in future then a Trust operates as a useful way to ring-fence assets and ensure that those assets are not subject to a claim by their creditors.
Trusts can also be used as an effective tax planning mechanism and certainly have the potential to allow for significant tax savings.
There are a number of reasons why someone may consider creating a Trust and with careful planning a Trust can serve as a useful means to protect your assets.