Who can be a Trustee?
You may consider a family member, a friend or professional advisor. If you choose a professional advisor, they are entitled to charge for their role as trustee. However, a lay trustee such as a friend or family member cannot charge. We strongly advise that you choose a professional trustee, as they are independent and can ensure that the trust is administered to comply with ongoing requirements.
Your trustees’ main duty is to ensure that they look after the Trust property and manage it for your sole benefit. They will need to keep bank statements, written records of decisions made and review the Trust on an annual basis to ensure that it is running smoothly.
You can change your trustees or end the Trust at any time.
There are many types of Trust that our specialist solicitors at NewLaw Scotland can help you with and many reasons why you should consider setting one up. Some of those reasons for setting up a Trust are as follows:
Personal Injury Trust
Where you have received a compensation payment for an injury you have suffered. A Personal Injury Trust will provide you with essential protection for your compensation monies. If you are in receipt of means tested benefits, or you may need access to means tested benefits, which includes long term care in the future, it is important that you take advice on setting up a Personal Injury Trust to protect your compensation award.
You are entitled to a 52 week grace period starting from the date you first receive any payment deriving from your personal injury to the date of setting up a Trust. During this period, the benefits agency will disregard your compensation monies, unless it is made specifically for care. However, we recommend that you set up a Personal Injury Trust as soon as possible. If you have made a claim for a personal injury and you are expecting to receive compensation in relation to that claim, you should immediately seek advice on setting up a Personal Injury Trust.
A Personal Injury Trust will protect your entitlement to means tested benefits. It will also protect your future entitlement to means tested benefits, which may include long term care. If you use your compensation to pay off part or your entire mortgage or you use it to buy a property, you can protect all or a part of your property against means testing.
Protection of Children
A child may inherit property or other assets when they are under the age of 16. Whilst property can be owned at this age, they may not have the capacity to manage or deal with it. Until the child reaches an age where it is expected that they will be able to manage the property effectively, it is advisable to place the property in a Trust. Trustees can manage the property on behalf of the child until they reach a certain age (normally 21, 25, 30) or indefinitely.
Protection of People with Incapacity
This is a trust to protect a person or persons who lack capacity to take some or all decisions because of a mental disorder or an inability to communicate. It allows the trustees, who can be a relative, friend, partner, professional trustee, etc., to look after the property or finances on the person’s behalf. Where that person receives a large sum of money or property, it can be passed to the trustees to hold on Trust for the benefit of the incapable person. There are various types of Trust that can be used in this situation, including the Disabled Persons Trust, which is tax efficient and can preserve state benefits.
Protection of spouses or partners or others
Where a person is going to inherit a large sum of money or property from their spouse or partner on death and the spouse or partner is concerned about how that person is going to be able to cope with the money or property on their own, they can leave this to them in Trust under their Will. This takes the stress away from the surviving spouse or partner, as they will have the comfort of knowing that they have people looking after things for them under the Trust.
This covers a number of areas including:
The spendthrift: If you would like to pass money or property to a person either during your lifetime or through your Will, but you are worried that they will invest it in an unsuitable fashion or squander it, a Trust is an ideal solution. It means the Trust funds or property will not end up in the hands of creditors. The Trustees are under an obligation to invest and spend the money wisely and will prevent the money being used in a way that would be against your wishes. There are several types of Trust that would be ideal for this situation.
Divorce: Once non-matrimonial property is transferred into a Trust, no one person owns it, so it takes it out of the equation for a settlement on divorce. Non-matrimonial property can include inherited assets, business assets acquired before marriage and, in some case, assets acquired post-separation.
Claim from creditors: if money or property is transferred to a person who then gets into financial difficulty, that money or property is regarded as part of their estate and may need to be used to pay off creditors. If the property or money is put into a Trust from the outset, it is ring fenced against any claims made by creditors. This does however depend on how the person’s finances are when the Trust is set up.
Inheritance - legal rights: On a person’s death, whether or not they left a Will, a surviving spouse or civil partner and children are entitled to certain "legal rights" out of the deceased person's moveable estate. The moveable estate includes property such as money, shares, car, furniture and jewellery but does not include land and buildings.
The surviving spouse or civil partner is entitled to one-third of the deceased's moveable estate if the deceased left children or grand-children, or to one-half of it if the deceased left no such children or descendants. The children are collectively entitled to one-third of the deceased's moveable estate if the deceased left a spouse or civil partner, or to one-half of it if the deceased left no spouse or civil partner.
To defeat a legal rights claim, a person can move some or all of their moveable estate into a Trust for their own benefit during their lifetime and then, after death, leaving it to their preferred heirs, thereby removing it from their estate for legal rights purposes.