What wishes should you set out when creating a trust to pass on wealth?

A trust can be a valuable financial tool when you want to pass on wealth to loved ones. Rather than simply handing over assets, you can set out your wishes and maintain control over how they’re used. So, understanding what your wishes are and how to ensure they’re followed is important.

A trust is a legal arrangement. It allows you to set aside assets, such as cash, investments, or property, for another person or persons, known as the “beneficiary”. Rather than the beneficiary having access to these assets to use as they wish, a trustee will manage them on their behalf according to your wishes.

A trustee could be someone you know well, such as a family member or friend, or a professional.

As a result, a trust can be a useful way to pass on assets to children or vulnerable people. They can also be valuable if you want to retain some control over how the assets are used and create a long-term legacy.

To ensure your wishes are carried out, it’s crucial that a trust is set up properly and that you take some time to consider what you want the trust to achieve. These four questions can help you start to think about what’s important to you when creating a trust.

1. Who do you want to benefit from the assets?

You should start with your reasons for setting up a trust and who you’d like to benefit from the assets you will place in it.

Setting out the beneficiaries and why you want to offer financial support can help you understand which type of trust and assets you need to reach your goals.

As well as naming individuals, you may also want to include other beneficiaries. For example, you might want to provide for future grandchildren.

2. When and how do you want an income to be provided to the beneficiary?

If you’d like the trust to provide an income, you will need to set out when you’d like this to happen. You will also need to consider what income will be provided. Will it be a set amount each time or a proportion of returns?

You can either set out clear wishes or give the trustee the ability to decide. A trustee will have to follow any instructions you provide in the trust deed and act in the best interests of the beneficiary.

You may choose not to provide a regular income to a beneficiary. If you set up a trust to pass on assets to a child, you may simply want them to be able to access the assets when they reach adulthood, for example.

3. Do you want the beneficiary to be able to access the assets?

Is there a point when you’d like the beneficiary to access or take control of the assets you’ve placed in the trust?

This can make sense if you want a child to inherit the assets. You will need to decide if there’s a specific time or set of circumstances when you’d like this to happen. Again, you can choose for the trustee to have the power to make this decision.

In some cases, you may not want the initial beneficiary to have access to the assets at all. This may be because you want to create a long-term legacy so your descendants can benefit from the income for years to come.

This could also be the case if you want your partner to benefit from the income delivered from the assets during their lifetime, but for the assets to remain intact to pass on to your children once your partner passes away.

4. How would you like the trustee to manage the assets?

One of the benefits of using a trust is that you can set out how the trustee will manage the assets. You may have clear ideas about how you’d like them to be used or prefer to give your trustee the power to make their own decisions.

You can use the trust deed to set out your preference. For example, would you want the trustee to invest cash placed in the trust?

In addition, you can also write a letter of wishes. This is an informal letter that is not legally binding. However, it can be a useful way to give the trustee guidance and explain your wishes without legal jargon.

Contact us to talk about trusts

One of the benefits of using trusts is that it allows you to maintain some control, but this can be overwhelming too.

We’re here to help you navigate trusts, from whether they could help you reach your goals to maintaining a trust for the long term to ensure it continues to meet your wishes. Contact us to talk about your legacy.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate or tax planning.

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