Introduction
A trust is a legal arrangement or account between three parties, namely the settlor, the beneficiary, and the trustees. It deals with how different assets like cash or property will be handled and managed.
The deed will be written by a trustee, like WLS Solicitors Ltd Incorporating Abrahams Wills And Legal Services, and once done, the types of obligations will be looked at.
Now, since you know the basic meaning of a trust, let’s have a glance at the pros and cons of establishing a trust fund in the UK.
Set Up a Trust Fund: Pros
Establishing a trust fund ensures that your assets are well protected and passed on to future generations effectively. Knowing the pros of establishing a trust will help you make informed decisions about financial planning.
1. Create a Trust Fund so that Beneficiaries Get Control over Assets
The primary benefit of a trust fund is that it provides control over the management of assets. As opposed to a will, a trust will allow you to set specific terms and conditions on how you want to distribute your assets.
For example, in a trust, you can set terms regarding that the beneficiaries will receive the funds only after reaching a certain age or achieving milestones like completing their education.
With this control, your assets will be distributed according to your preferences.
2. Get Tax Benefits
Another benefit of trust funds is the estate tax advantages they provide. Sometimes trust funds can remove your assets from the taxable estate, thus helping you achieve significant tax savings.
Moreover, when you distribute your income among multiple beneficiaries, then you can get the benefit of income tax.
However, consulting with advisor can help you navigate these complex tax benefits, ensuring you make the most of your different types of trust fund.
3. Privacy of Type of Trust Funds
A living trust fund offers the benefit of privacy compared to a will. A will is a legal document that becomes public upon death.
However, a trust fund remains private even in these situations. This means the details of your estate, like the assets and beneficiaries, will not be revealed even after your death.
So, a trust fund can be especially beneficial for individuals who do not want their financial matters to be disclosed to the public.
4. Avoid Probate
Probate refers to the legal process through which a will gets executed. This legal process can be time-consuming and expensive. On the other hand, a trust fund can help the beneficiaries avoid this process altogether.
Trust funds do not require the intervention of the court because the assets in these funds can be directly transferred to the beneficiaries. This results in a quicker distribution of the assets in an efficient manner.
5. Gain Protection from Creditors
Trust funds provide protection from creditors’ claims because when the assets are placed in these funds, they cannot be used to satisfy any debts. This ensures that the beneficiaries receive their inherited assets without any risk.
6. Benefits to Minors or Special Needs Beneficiaries
Families who have minor children receive long-term financial support with the help of trust funds. A trust fund ensures that the assets in it are managed and distributed in the best possible way to provide financial security and stability to the minors.
Establishing a Trust Fund: Cons
1. Time and Cost Intensive
A major drawback of establishing a trust fund is the complex and cost-intensive process it involves. The process of getting a trust fund created requires legal expertise and careful planning.
The administrative costs and legal fees of the process can also be quite expensive.
However, you can get guidance to help streamline your trust fund creation process and minimize costs from an expert agency like WLS Solicitors Ltd Incorporating Abrahams Wills And Legal Services.
2. Loss of Control Over Assets by the Settlor
When you place your assets in trusts, like an irrevocable trust, you lose your entire control over them. Your trustee will manage these assets according to the terms and conditions of the trust, and it is quite difficult to retrieve your assets in the trust.
This can be a significant drawback for individuals who may want to access their assets in the future.
3. Chances of Disputes
Trust funds can also be the root cause of disputes among beneficiaries. Any differences in the recommendations and opinions of the beneficiaries can cause friction in the family.
Though appointing a reliable trustee can help minimize the risk, these funds may still result in bad blood in families.
4. Ongoing Support & Administrative Responsibilities
Getting a trust fund set up is not as simple as it seems. Even after your trust fund is established, it will require ongoing management and administration, which can be worrisome for people with hectic schedules.
The trustee will have to keep records of the funds, file tax returns, and comply with all legal requirements. This will require you to get professional assistance from experts like WLS Solicitors Ltd.
5. Regular Updates in Laws and Rules
In this era of dynamic trends, the legal regulations and tax laws may change over time, thus impacting your trust fund. It is crucial that you stay up to date with all these legal changes to adjust your fund accordingly.
This is possible only if you work with an expert legal agency like WLS Solicitors Ltd so that your trust complies with all the changing legal conditions.
Conclusion
Establishing a trust fund has its own pros and cons. Understanding both these aspects is crucial to determine if setting up a trust fund is beneficial for you or not.
This decision will require expert guidance and planning from legal agencies like WLS Solicitors Ltd Incorporating Abrahams Wills And Legal Services.
So, what are you waiting for? Contact them today to learn more!
