What is a trust?

A trust is a means of reducing inheritance tax as assets transferred into it during a person’s lifetime are no longer part of that person’s estate. The person transferring assets into a trust is known as a settlor. The people responsible for running the trust are trustees; they can be family members or professional trustees. They should run the trust in accordance with the wishes of the settlor.

The settlor should not benefit from assets within the trust (e.g. the settlor should not be living in a property within the trust rent - free) in order for them to not be considered part of the settlor’s estate. The people who ultimately benefit from the trust are beneficiaries named by the settlor.

Different types of trusts exist; their creation is complex and should always involve a solicitor specialised in such matters.

In the case of an older person setting up a trust, a mental capacity assessment is recommended to reduce any successful legal challenges later on.