Trusts ...
What is a trust?
A trust is an obligation binding a person called a trustee to deal with property - this can be land or buildings; investments; money; antiques or other valuable property - in a particular way for the benefit of one or more 'beneficiaries'.
Settlor
The settlor creates the trust and puts property into it at the start, often adding more later. The settlor says in the trust deed how the trust's property and income should be used.
Trustee
Trustees are the 'legal owners' of the trust property and must deal with it in the way set out in the trust deed. They also administer the trust. There can be one or more trustees.
Beneficiary
This is anyone who benefits from the property held in the trust. The trust deed may name the beneficiaries individually or define a class of beneficiary, such as the settlor's family.
The main types of private UK trust:
Bare trust
In a trust the property is held in the trustee's name - but the beneficiary can take actual possession of both the income and trust property whenever they want. You may, for example, use this type of trust to pass gifts to children while you're still alive.
Interest in possession trust
In an interest in possession trust the beneficiary has a legal right to all the trust's income (after expenses), but not to the property.
You can, for example, set up an interest in possession trust in your will. You might then leave the income from the trust property to your partner for life and the trust property itself to your children when your partner dies.
Discretionary trust
The trustees of a dicretionary trust decide how much income or capital, if any, to pay to each of the beneficiaries - but none has an automatic right to either. You can use a discretionary trust as a way to pass on property while you're still alive and still keep some control over it through the terms of the trust deed.
Accumulation and maintenance trust
An accumulation and maintenance trust is used to provide money to look after children during the age of minority. Any income that isn't spent is added to the trust property, all of which later passes to the children.
Mixed trust
A mixed trust may come about when one beneficiary of an accumulation and maintenance trust reaches 18 and others are still minors. Part of the trust then becomes an interest in possession trust.