Chester: 01244 354800
Liverpool: 0151 3210000
Legal 500 Top Tier Firm 2024  
Solicitors in Chester and Liverpool
Image of a Country Estate - Understanding Trusts Article

Trusts are a vital component of estate planning, offering individuals a means to manage and safeguard their assets for the benefit of others. While the concept of a trust might seem complex, it essentially involves trustees holding and overseeing assets for the benefit of beneficiaries. Let’s delve into the intricacies of trusts, understanding the types of trusts, and why they are essential in estate planning.


What is a Trust?

At its core, a trust is an arrangement where trustees manage assets, known as the trust fund, on behalf of beneficiaries. The creators of the trust, known as Settlors, establish the terms and conditions under which the assets are managed and distributed. The trust provides a layer of separation between the trustees and the ownership of assets, offering benefits such as asset protection and tax planning opportunities.


Why Use a Trust?

People opt for trusts for various reasons, including:

Asset Protection: Trusts provide a level of protection against creditors, lawsuits, or other financial claims.

Tax Planning: Different types of trusts offer tax advantages, allowing individuals to minimise tax liabilities and optimise wealth transfer.

Control and Flexibility: Trusts enable the Settlor to specify how and when assets are distributed, even beyond their lifetime.


Common Types of Trusts

While there are numerous trust variations, you do not need to understand all the trusts available. Some of the most encountered types include:

Bare Trust: Trustees hold assets for beneficiaries, who have absolute entitlement to both capital and income.

Life Interest Trust: Beneficiaries, known as life tenants, have the right to income from the trust during their lifetime, with assets passing to remaindermen upon their death.

Discretionary Trust: Trustees have full discretion over the distribution of assets among a specified class of beneficiaries, offering flexibility and protection against financial claims.

Vulnerable Beneficiary Trust: Designed for beneficiaries with physical or mental impairments, offering favourable tax treatment and protection of assets.

Will Trust: Established under the terms of a Will, becoming active upon the deceased’s death.

Life Policy Trust: Created to hold life insurance policies, ensuring proceeds are not subject to inheritance tax.

Accumulation and Maintenance Trust: Historically popular for tax benefits, now falling under the relevant property regime.

Settlor Interested Trust: Involving the Settlor benefiting from the trust or capable of benefiting, often complex and requiring specialist advice.


Choosing the Right Trust

Selecting the appropriate trust depends on individual circumstances and goals. Bare trusts are ideal for simplicity, while life interest trusts provide support to beneficiaries with safeguards for asset transfer. Discretionary trusts offer control, flexibility, and protection against financial claims, making them suitable for estate planning and tax optimisation.

In conclusion, trusts play a pivotal role in managing and protecting assets for future generations. Seeking advice from qualified professionals, such as STEP (Society of Trust and Estate practitioners), is crucial to ensuring the most suitable trust arrangement for your specific needs.

Whether it’s asset protection, tax efficiency, or legacy planning, trusts offer invaluable tools for securing financial futures. Speaking to a legal expert will help with understanding the trust that is best for your specific needs.


Speak to a Trusts & Estates Solicitor

Succession planning can often be a complex process and speaking to an expert in the field is highly advised. At DTM Legal our  Trusts and Estates team is highly experienced, working with a diverse range of clients and providing advice tailored to individual circumstances.

For more information or an appointment please contact:

Heather Lally on 01244 354 800 or email


Common Types of Trusts PDF

Complete the form below to receive a helpful PDF which further details the key features of the common types of trust and their tax implications.

I would like someone to give me a call to discuss my requirements

Back to Insights

Sign up to our newsletter

Get regular news & updates