Setting up a trust

Trusts may either be set up during your lifetime (inter vivos or living trust) or after your death as requested in a will (will trust or testamentary trust).

How do I set up a trust?

A trust can be set up at any time in your life. It is usually set up by having a trust deed drawn up by a solicitor (although technically anyone can draw up a legally binding trust) saying who the trustees are, who the beneficiaries are, how the trust is to be run and what assets you are putting into the trust.

You then pass these assets into the trust by giving them to the trustee. A trust that starts when you die needs to be made a part of your will.

Parties involved in a trust

Trusts involve the following parties: the donor/ settlor (the person putting the assets or money into trust), the trustee(s) (the company or person who ensures that the settlor’s wishes are carried out) and beneficiary/beneficiaries (the person or people who benefit from the trust). You can read more about the role of these parties by reading our guide: what is a trust?

Trust Deeds

The trust deeds, also known as the declaration of trust, is a legally binding document establishing a framework of rules and terms which the trustees must adhere to. It may describe:

  • The purpose of the trust, such as who the beneficiaries are
  • Who the trustees are and their roles including responsibilities and powers
  • The process if they are to be appointed or removed
  • The investment approaches of the assets
  • If the deed can be altered at any point
  • The outcome if the settlor is to pass away

This is a legally binding document, also known as a declaration of trust, which holds the trust together. It is usually written by the settlor with the help of a financial adviser or solicitor and will outline the trust's intentions and outcomes.

Each type of trust fund you may set up is susceptible to different tax rules. Remember that, if you are a trustee, you are responsible and liable for any tax that needs to be paid on a trust and it is your duty to adhere to these rules.

Advice on setting up a trust

It can be worthwhile seeking professional help when forming the trust deeds to ensure they are legally binding. Whatever stage you are at in setting up a trust fund, and whichever party you are to the trust, a financial adviser can offer bespoke advice on trusts.

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Last updated: 01 July 2016