Скачать или смотреть What is a Declaration of Trust? Wills & Probate Solicitors

Specialist solicitor Claire Booth explains what a declaration of trust is. Claire considers the benefits and the potential negatives of making a declaration of trust as well as underlining the importance of expert legal advice so people considering making a declaration of trust are aware of the full consequences, both in terms of how it will impact them, how it will impact the beneficiaries of the trust and also the tax consequences.

For more information about making a declaration of trust call the experts at Stephensons on 0333 323 3760 or click the link below to visit our website:

https://www.stephensons.co.uk/site/in...

*Claire Booth is no longer part of the team at Stephensons but we are still able to assist with enquiries of this nature.

Video transcript

A declaration of trust is where somebody places assets into a legal structure known as a trust. The person putting the assets in is known as the settlor and they transfer the assets into a trust and it's held by trustees on the terms of the trust that the settlor has set out. A trust is effectively a gift with strings attached.

So the person making the declaration of trust has gifted assets into that trust and then set out the conditions of that. So there's lots of reasons why somebody might consider making a declaration of trust. It can be that they are looking to secure asset protection so that they know how that asset that they've gifted into the trust will be dealt with in the future. It might be that they're looking for inheritance tax planning, so to use declarations of trust to move assets outside of their estate for inheritance tax purposes. And it might be that they're looking to protect, particular beneficiaries, for instance, it might be that they're looking to leave assets for minor children, minor grandchildren who aren't able to hold assets themselves. And also then there are times when they might look to protect people who aren't capable of holding assets themselves because they're incapacitated.

What are the benefits of making a declaration of trust?

The benefit of making a declaration of trust is that you set out the terms of the trust from when it is established, you as the settlor or the person making the gift, so you set the terms of how it's to be used and you have in that way kept some form of control as to how that asset should be held and managed in the future.

The benefit can be for asset protection so that you're able to ensure how that asset is managed in the future if you are looking to protect particular beneficiaries, so that can be that you're looking to help minor beneficiaries or people who are incapacitated or that you're looking to keep some kind of family control over an asset in the future. For example, if you are concerned as to if one of the potential beneficiaries might become divorced in the future so that the asset wouldn't be in their sole name and taken into account within financial proceedings on a divorce or even if there were future bankruptcy and potential beneficiaries.

Are there any negatives to a declaration of trust?

There are some negative factors to placing assets into a declaration of trust. It is a gift of those assets, so whilst you do get to set the terms of the trust, you have gifted it away, it is no longer your asset and that is something that obviously people need to be aware of that that is a gift that they've made.

You also might then face risks depending upon the asset that you've gifted away. Because it is a gift, you've lost control of it, so there might be negative factors for you to be aware of in that there might be some risks to you having gifted that asset. For example, if it was your home that you might have, that you were placing into a trust, there might be risks for you in being able to make sure that you're able to continue living in that property for your future.

It is important that somebody enters into a declaration of trust, knowing the full consequences, both in terms of how that will impact them, how it will impact the beneficiaries of the trust, and then also tax consequences. So it is important for somebody to have legal advice before they enter into declaration of trust.