{"id":417,"date":"2020-05-03T15:57:41","date_gmt":"2020-05-03T14:57:41","guid":{"rendered":"https:\/\/thefinancialeducation.co.uk\/?p=417"},"modified":"2020-05-03T15:58:32","modified_gmt":"2020-05-03T14:58:32","slug":"4-types-of-trusts","status":"publish","type":"post","link":"https:\/\/thefinancialeducation.co.uk\/index.php\/2020\/05\/03\/4-types-of-trusts\/","title":{"rendered":"Types of trust"},"content":{"rendered":"\n<p>The main types of trust are:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>bare trusts<\/li><li><abbr class='c2c-text-hover' title='Interest in possession (IIP) trusts give a named beneficiary (or beneficiaries) the right to any trust income. This beneficiary is often referred to as the life tenant of the trust (or life renter in Scotland). The right to income could also be satisfied by allowing the life tenant to benefit from the trust property without actually owning it. For example, it may allow them to live rent free in a residential property owned by the trust. Importantly, trustees cannot accumulate income'>interest in possession<\/abbr> trusts<\/li><li>discretionary trusts<\/li><li>accumulation trusts<\/li><li>mixed trusts<\/li><li>settlor-interested trusts<\/li><li>non-resident trusts<\/li><\/ul>\n\n\n\n<p>Each type of trust is taxed differently. Trusts involve a&nbsp;<a href=\"https:\/\/www.gov.uk\/trusts-taxes\/overview\">\u2018trustee\u2019, \u2018settlor\u2019 and \u2018beneficiary\u2019<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"bare-trusts\">Bare trusts<\/h2>\n\n\n\n<p><abbr class='c2c-text-hover' title='Resources owned\/controlled by a business\/something valuable belonging to a person or organization that can be used for the payment of debts.'>Assets<\/abbr> in a bare trust are held in the name of a trustee. However, the beneficiary has the right to all of the <abbr class='c2c-text-hover' title='is anything that increases one\u2019s ability to generate value. It can be used to increase value across a wide range of categories, such as financial, social, physical, intellectual, etc. In business and economics, the two most common types of capital are financial and human. Capital is the money used to build, run, or grow a business. It can also refer to the net worth (or book value) of a business. Capital most commonly refers to the money used by a business either to meet upcoming expenses, or to invest in new assets and projects.'>capital<\/abbr> and income of the trust at any time if they\u2019re 18 or over (in England and Wales), or 16 or over (in Scotland). This means the <abbr class='c2c-text-hover' title='Resources owned\/controlled by a business\/something valuable belonging to a person or organization that can be used for the payment of debts.'>assets<\/abbr> set aside by the settlor will always go directly to the intended beneficiary.<\/p>\n\n\n\n<p>Bare trusts are often used to pass <abbr class='c2c-text-hover' title='Resources owned\/controlled by a business\/something valuable belonging to a person or organization that can be used for the payment of debts.'>assets<\/abbr> to young people &#8211; the trustees look after them until the beneficiary is old enough.<\/p>\n\n\n\n<p><strong>Example:<\/strong><\/p>\n\n\n\n<p>You leave your sister some money in your will. The money is held in trust.<\/p>\n\n\n\n<p>Your sister is <abbr class='c2c-text-hover' title='give (someone) a legal right or a just claim to receive or do something.'>entitled<\/abbr> to the money and any income (for example interest) it earns. She can also take possession of any of the money at any time.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"interest-in-possession-trusts\"><abbr class='c2c-text-hover' title='Interest in possession (IIP) trusts give a named beneficiary (or beneficiaries) the right to any trust income. This beneficiary is often referred to as the life tenant of the trust (or life renter in Scotland). The right to income could also be satisfied by allowing the life tenant to benefit from the trust property without actually owning it. For example, it may allow them to live rent free in a residential property owned by the trust. Importantly, trustees cannot accumulate income'>Interest in possession<\/abbr> trusts<\/h2>\n\n\n\n<p>These are trusts where the trustee must pass on all trust income to the beneficiary as it arises (less any expenses).<\/p>\n\n\n\n<p><strong>Example:<\/strong><\/p>\n\n\n\n<p>You create a trust for all the shares you owned.<\/p>\n\n\n\n<p>The terms of the trust say that when you die, the income from those shares go to your wife for the rest of her life. When she dies, the shares will pass to your children.<\/p>\n\n\n\n<p>Your wife is the income beneficiary and has an \u2018<abbr class='c2c-text-hover' title='Interest in possession (IIP) trusts give a named beneficiary (or beneficiaries) the right to any trust income. This beneficiary is often referred to as the life tenant of the trust (or life renter in Scotland). The right to income could also be satisfied by allowing the life tenant to benefit from the trust property without actually owning it. For example, it may allow them to live rent free in a residential property owned by the trust. Importantly, trustees cannot accumulate income'>interest in possession<\/abbr>\u2019 in the trust. She does not have a right to the shares themselves.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"discretionary-trusts\">Discretionary trusts<\/h2>\n\n\n\n<p>These are where the trustees can make certain decisions about how to use the trust income, and sometimes the <abbr class='c2c-text-hover' title='is anything that increases one\u2019s ability to generate value. It can be used to increase value across a wide range of categories, such as financial, social, physical, intellectual, etc. In business and economics, the two most common types of capital are financial and human. Capital is the money used to build, run, or grow a business. It can also refer to the net worth (or book value) of a business. Capital most commonly refers to the money used by a business either to meet upcoming expenses, or to invest in new assets and projects.'>capital<\/abbr>.<\/p>\n\n\n\n<p>Depending on the trust <abbr class='c2c-text-hover' title='A deed is a written document which is executed with the necessary formality (that is, more than a simple signature), and by which an interest, right or property passes or is confirmed, or an obligation binding on some person is created or confirmed. Deeds are generally enforceable despite any lack of consideration.'>deed<\/abbr>, trustees can decide:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>what gets paid out (income or <abbr class='c2c-text-hover' title='is anything that increases one\u2019s ability to generate value. It can be used to increase value across a wide range of categories, such as financial, social, physical, intellectual, etc. In business and economics, the two most common types of capital are financial and human. Capital is the money used to build, run, or grow a business. It can also refer to the net worth (or book value) of a business. Capital most commonly refers to the money used by a business either to meet upcoming expenses, or to invest in new assets and projects.'>capital<\/abbr>)<\/li><li>which beneficiary to make payments to<\/li><li>how often payments are made<\/li><li>any conditions to impose on the beneficiaries<\/li><\/ul>\n\n\n\n<p>Discretionary trusts are sometimes set up to put <abbr class='c2c-text-hover' title='Resources owned\/controlled by a business\/something valuable belonging to a person or organization that can be used for the payment of debts.'>assets<\/abbr> aside for:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>a future need, like a grandchild who may need more financial help than other beneficiaries at some point in their life<\/li><li>beneficiaries who are not capable or responsible enough to deal with money themselves<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"accumulation-trusts\">Accumulation trusts<\/h2>\n\n\n\n<p>This is where the trustees can accumulate income within the trust and add it to the trust\u2019s <abbr class='c2c-text-hover' title='is anything that increases one\u2019s ability to generate value. It can be used to increase value across a wide range of categories, such as financial, social, physical, intellectual, etc. In business and economics, the two most common types of capital are financial and human. Capital is the money used to build, run, or grow a business. It can also refer to the net worth (or book value) of a business. Capital most commonly refers to the money used by a business either to meet upcoming expenses, or to invest in new assets and projects.'>capital<\/abbr>. They may also be able to pay income out, as with discretionary trusts.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"mixed-trusts\">Mixed trusts<\/h2>\n\n\n\n<p>These are a combination of more than one type of trust. The different parts of the trust are treated according to the tax rules that apply to each part.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"settlor-interested-trusts\">Settlor-interested trusts<\/h2>\n\n\n\n<p>These are where the settlor or their spouse or civil partner benefits from the trust. The trust could be:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>an <abbr class='c2c-text-hover' title='Interest in possession (IIP) trusts give a named beneficiary (or beneficiaries) the right to any trust income. This beneficiary is often referred to as the life tenant of the trust (or life renter in Scotland). The right to income could also be satisfied by allowing the life tenant to benefit from the trust property without actually owning it. For example, it may allow them to live rent free in a residential property owned by the trust. Importantly, trustees cannot accumulate income'>interest in possession<\/abbr> trust<\/li><li>an accumulation trust<\/li><li>a discretionary trust<\/li><\/ul>\n\n\n\n<p><strong>Example:<\/strong><\/p>\n\n\n\n<p>You can no longer work due to illness. You set up a discretionary trust to make sure you have money in the future.<\/p>\n\n\n\n<p>You\u2019re the settlor &#8211; you may also benefit from the trust because the trustees can make payments to you.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"non-resident-trusts\">Non-resident trusts<\/h2>\n\n\n\n<p>This is a trust where the trustees are not resident in the UK for tax purposes. The&nbsp;<a href=\"https:\/\/www.gov.uk\/non-resident-trusts\">tax rules for non-resident trusts<\/a>&nbsp;are very complicated.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<p>Source:<\/p>\n\n\n\n<p><a href=\"https:\/\/www.gov.uk\/trusts-taxes\/types-of-trust\">https:\/\/www.gov.uk\/trusts-taxes\/types-of-trust<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The main types of trust are: bare trusts <abbr class='c2c-text-hover' title='Interest in possession (IIP) trusts give a named beneficiary (or beneficiaries) the right to any trust income. This beneficiary is often referred to as the life tenant of the trust (or life renter in Scotland). The right to income could also be satisfied by allowing the life tenant to benefit from the trust property without actually owning it. For example, it may allow them to live rent free in a residential property owned by the trust. Importantly, trustees cannot accumulate income'>interest in possession<\/abbr> trusts discretionary trusts accumulation trusts mixed trusts settlor-interested trusts non-resident trusts Each type of trust is taxed differently. Trusts involve a&nbsp;\u2018trustee\u2019, \u2018settlor\u2019 and \u2018beneficiary\u2019. Bare trusts <abbr class='c2c-text-hover' title='Resources owned\/controlled by a business\/something valuable belonging to a person or organization that can be used for the payment of debts.'>Assets<\/abbr> in a <a href=\"https:\/\/thefinancialeducation.co.uk\/index.php\/2020\/05\/03\/4-types-of-trusts\/\" class=\"read-more\">Read More &#8230;<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_eb_attr":"","_uag_custom_page_level_css":"","footnotes":""},"categories":[27],"tags":[],"table_tags":[],"class_list":["post-417","post","type-post","status-publish","format-standard","hentry","category-308bir"],"featured_image_src":null,"author_info":{"display_name":"admin","author_link":"https:\/\/thefinancialeducation.co.uk\/index.php\/author\/admin\/"},"uagb_featured_image_src":{"full":false,"thumbnail":false,"medium":false,"medium_large":false,"large":false,"1536x1536":false,"2048x2048":false,"education-hub-thumb":false},"uagb_author_info":{"display_name":"admin","author_link":"https:\/\/thefinancialeducation.co.uk\/index.php\/author\/admin\/"},"uagb_comment_info":2,"uagb_excerpt":"The main types of trust are: bare trusts interest in possession trusts discretionary trusts accumulation trusts mixed trusts settlor-interested trusts non-resident trusts Each type of trust is taxed differently. Trusts involve a&nbsp;\u2018trustee\u2019, \u2018settlor\u2019 and \u2018beneficiary\u2019. Bare trusts Assets in a Read More ...","_links":{"self":[{"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/417","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/comments?post=417"}],"version-history":[{"count":4,"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/417\/revisions"}],"predecessor-version":[{"id":421,"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/417\/revisions\/421"}],"wp:attachment":[{"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/media?parent=417"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/categories?post=417"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/tags?post=417"},{"taxonomy":"table_tags","embeddable":true,"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/table_tags?post=417"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}