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Types of Trust Explained
Learn about the many different types of Trust that can be set up.
- A Will Trust is any Trust created by an individual’s will
- It may be used to reduce Inheritance Tax
- The Settlor’s Will document replaces the usual Trust Deed document.
- Trustees have discretion over which of the beneficiaries should receive any Trust income
- They can decide if Trust income should be added to the Trust’s capital or accumulated for distribution to the beneficiaries
- Beneficiaries have little or no say in decision making.
- Can be created for an educational or scientific purpose for example and is organised as a legal Charity
- Must have a charitable purpose and public benefit
- Tax on a Charitable Trust may be paid gross
- The Charity Commission is able to provide advice to Charitable Trusts.
Personal Injury Trust
- It is the source of the Trust funds that defines it
- Funded by an award of compensation for a personal injury
- The ‘Settlor’ or person funding the Trust will usually be the injured party
- Personal Injury Trusts may be set up as a bare, life interest or discretionary trust.
- The beneficiary has a right to both income and capital from the trust fund, and has a right to withdraw all of the income and capital if they are 18 or over
- The beneficiary is also entitled to take ownership and control of the Trust
- Trustees act as nominees for the beneficiary and must act according to their instructions.
Life Interest Trust
- Beneficiaries are known as ‘life tenants’
- Income will be paid to one or more beneficiaries in fixed proportions
- At the end of a defined period, possibly the beneficiary’s death or a pre-determined date set by the Trustees their life interest will end
- At the end of one life interest another beneficiary will become entitled to the Trust assets or will be granted their own life interest.
Accumulation and Maintenance Trust
- Are a special class of Discretionary Trust
- To qualify all beneficiaries must have a common grandparent, when each beneficiary reaches the age of 25 they must be given a life interest in their share of the fund
- There is no age limit as to when the beneficiary receives the Trust capital.
Opening a Trust Savings Account
Bath Building Society offers a specific Trust account that is aimed at all of the types of Trust that are mentioned in this article, as long as the Trust is UK based
To find out more please visit our Trust page or contact our Customer Support Team on 01225 475709.
The information given in this guide is based on Bath Building Society’s understanding of Trusts as at March 2015, which may change in future. It does not constitute a recommendation and individuals are advised to seek professional independent advice.