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A trust is created when you give assets (such as property, shares or money) to a small group of people (the ‘trustees’) and tell them to hold onto those assets on behalf of one or more different people (the ‘beneficiaries’).

A trust can be made during your lifetime or within a Will. Generally, the terms of the trust have to be written down so that everyone knows where they stand.

Generally, trusts are made for one of two reasons:

1. Tax – For example to give assets away so as to avoid paying inheritance tax on those assets when you die; and

2. Family planning – You may want to give assets to your children but are worried about them being too young, or losing those assets in a divorce. By putting the assets into trust you can protect against these problems.

Some people wonder why they need to use a trust – why not just give your assets straight to whoever you want?

The following are some of the reasons why that may not be a good idea:

Control: If you give assets to a trust and you are one of the trustees of it, you have control over whether the asset is sold or not. There have been lots of cases of people giving assets (even their homes) straight to their children, who then go on and sell that asset straightaway, even if they have promised not to.

Capital Gains Tax: If you give an asset straight to someone, you will have to pay capital gains tax if it is worth more now than it was when you bought it – even though you haven’t actually sold it. If you use a trust you can in certain circumstances avoid paying that tax straightaway.

Divorce/bankruptcy: If you give an asset to someone it will be counted as theirs if they get divorced, are made bankrupt or even die. This could mean that the asset is lost in a way that you never expected. If you use a trust this shouldn’t be an issue.

You should speak to a trust solicitor to make a trust. There are different types of trusts and a trust solicitor can advise you on which one is the most suitable for you. Trust solicitors can also ensure that you are aware of any affected tax before you do anything.

Holiday homes: You might want to put a holiday home into a trust so that all the family can use it, but you won’t have to pay inheritance tax on it when you die;

In a Will: If you are married or have a partner, using a trust in your Will can help save on inheritance tax when one or both of you dies;

Care home fees: If you put your home into a trust, you may avoid the local authority being able to assess your home as part of your assets when deciding whether you can afford to pay care home fees.