Establishing a trust fund.

A trust is a legal arrangement whereby trustees, who are either an individual or company, oversee assets or money, known as the trust property, that are to be used for the benefit of one or more beneficiaries.

For instance, if you were to set up a trust for your friend, they would function as the trustee, your funds would be the trust property, and you would be the beneficiary, who reaps the rewards of the trust.

It's possible to deposit money, investments, or other assets into the trust, wherein some scenarios, such as certain types of trusts, require the trust to pay tax, and the trustees need to complete tax returns.

When setting up a trust, there are various reasons why you might choose to do so. For instance, a trust may assist individuals who lack financial management capabilities, guaranteeing that their needs are met, even in times when you're not present to offer assistance. They can also be utilized to ensure that your financial interests are taken care of when you're unable to do so yourself.

A trust can be particularly beneficial for children with learning disabilities or those with mental health conditions, ensuring that their financial affairs are cared for even after your passing. Additionally, trusts can support individuals with learning disabilities or mental health conditions eligible for state benefits.

In setting up your trust's legal language, it's crucial to be precise, so enlisting the aid of a solicitor may be wise. The Law Societies offer accessible databases to locate a trustworthy solicitor in your area.

Choosing trustees for your trust is equally significant, usually selecting relatives or trusted friends capable of handling responsibilities associated with the role. The trustees you choose must be happy to assume the responsibilities, and it's ideal to have between two and four trustees present. Alternatively, you may choose to appoint a company as a trustee such as a bank or solicitors, realizing they will incur a fee.

Establishing a trust through a solicitor may be pricey, typically costing £1,000 or more, but doing so eliminates costly errors that can occur when the trust's verbiage is uncertain or misleading. It's worth noting that certain charities offer schemes to support parents with the cost of establishing a trust for a child with a disability.

When receiving long-term care and inheriting from a trust, the local council will factor in the income and capital to which you are entitled when assessing you financially to determine their level of support. The handling of the trust assets varies based on the trust's terms.

In summary, if you can access the trust capital, it will be treated as your property. Conversely, if your entitlement is limited to income, the council will evaluate just the revenue and exclude the capital from the analysis. Finally, if you have absolute entitlement, the capital, and the income inherited from the trust are assessed similarly to capital you own.

Suppose the trustees have discretion over the payment you receive from a trust, in that case, the local council may only consider the actual payments you receive for a financial assessment. Certain specific trusts function as an exemption from a local council's evaluation of care fees. One such example would be trust funds or those managed by a court, resulting from a compensation payment for personal injury to an individual.

It is crucial to note that intentionally transferring your money into a trust to escape the means-testing for local authority support would almost certainly be regarded as deliberate deprivation of assets.

For further information on trusts, including trust types and tax treatment, please visit the GOV.UK website. Thank you for your valuable feedback. It helps us comprehend how we're performing and continuously improve our services and website.