How Much Money Do You Need to Set up a Trust in the UK?

How Much Money Do You Need to Set up a Trust in the UK? 

The cost of creating a simple trust is usually in the region of £1000 - £1,500. The exact amount depends on how much legal advice you need and how long it takes your solicitor to draft the very precise wording.

If you come to your Trust Solicitor with a good understanding of the important information you need to set up your trust, the cost of the initial legal advice can often be significantly reduced. This information includes:

• The precise purpose of the trust
• A list of assets to go into the trust
• Who controls the trust (the ‘trustee’)
• Who benefits from the trust (the ‘beneficiary’)
• And any other specific rules you would like to include (like an age requirement before funds or assets are released).

If your case is very complex, like if you have a vast collection of assets and/or business interests or any foreign assets that will require tax planning, the cost can be as high as £5,000 - £10,000.

What is a Trust?

Trusts come in many shapes and sizes and they’re a flexible way to structure your financial affairs. The law behind them can be complicated, so you must use a solicitor to make sure it is set up correctly based on your individual circumstances and needs.

Originally introduced during the reign of Henry VIII in the 16th century, trusts were invented to solve a gap in the justice system around Wills and how property should be transferred. 

Nowadays, trusts are an incredibly useful way of passing on your assets (like property, finances or businesses) whilst still retaining some control over what happens to it (among other benefits, depending on which route you take). 

There are only about 200,000 trusts currently active in the UK, but 1/5th of those were set up in the financial year between March 2021-2022 as people have learned about their benefits and realised they’re no longer just for the wealthy.

What is a Living Trust?

A living trust is set up during a person's lifetime and allows them to manage their assets and property while they are alive. It helps avoid probate and provides clear instructions for distributing assets after death.

What is a Settlor of a Trust?

The settlor is the person who creates the trust. They transfer their assets into the trust and set the rules for how those assets should be managed and distributed.

What Are Trusts Typically Used For?

Trusts are most commonly used to protect and control family assets. This is mainly because the assets inside a trust are treated separately from the assets owned by the individual (often for tax purposes), which can be very useful when it comes to things like Inheritance Tax.

Trusts are a great way of ensuring: 

• A person’s finances are secure when someone is too young to handle their own affairs
• Long-term care is set up financially for someone less able to take care of themselves
• Their own future is secure by holding future care home fees
• Assets can be more easily passed/transferred either during someone’s lifetime or upon their death.

Types of Trust

In the UK, there are a variety of trusts out there to choose from. Some trusts are set up in a Will so they’ll only take effect after someone dies, and others are set up during their lifetime. Your specialist Trusts Solicitor will help you pick the right type for you based on your needs.

What is a Bare Trust?

A Bare Trust allows the trustee to look after the assets, while the beneficiary can access them anytime if they are over 18 and competent. It is a straightforward trust where the beneficiary has an absolute right to the trust’s assets.

What is an Interest in Possession Trusts?

An Interest in Possession Trust lets the beneficiary enjoy any income the trust assets produce immediately. The trustee must pass all income generated from the trust to the beneficiary and cannot access the funds themselves.

What is a Discretionary Trust?

In a Discretionary Trust, the trustee has full control over what the beneficiaries can access and when. This includes setting conditions for access and how often payments are made. It offers flexibility but requires careful management.

What is an Accumulation Trust?

An Accumulation Trust does not allow beneficiaries immediate access to trust assets that generate income. The trustee decides whether the income goes to the beneficiaries or is reinvested within the trust, providing a way to grow the trust's assets over time.

What is a Non-resident Trust?

A Non-resident Trust applies when all beneficiaries live outside the UK, potentially reducing the tax they need to pay on the trust's income. It’s useful for managing assets and income for beneficiaries who are not UK residents.

What is a Mixed Trust?

A Mixed Trust combines elements of different types of trusts based on your needs, such as a blend of Bare Trust and Interest in Possession Trust. It offers tailored solutions to meet specific financial goals and circumstances.

Trusts for a vulnerable beneficiary

Trusts for vulnerable beneficiaries, such as those who are disabled or vulnerable children, have special tax treatment that is more favourable. These trusts ensure the beneficiary is provided for in a way that meets their specific needs while maximising tax benefits.

How to Set Up a Trust

Setting up a trust involves several steps. While it can be simpler than you might think, we recommend working with a solicitor to ensure everything is done correctly:

1. Define Your Goals: Figure out why you want to set up a trust. Whether it's for protecting family assets, planning for long-term care, or managing your business interests, having a clear purpose helps guide the process.
2. Pick the Right Trust: There are different types of trusts, each serving a unique purpose. Your Trusts Solicitor can help you choose the best one for your needs.
3. Choose Trustees: Select trustworthy individuals or professionals to manage the trust. They will ensure your wishes are followed and the assets are handled correctly.
4. Identify Beneficiaries: Decide who will benefit from the trust. This could be family members, friends, or even charities.
5. Draft the Trust Document: Work with your solicitor to create the trust document. This outlines the terms and conditions, such as specific rules for distributing the assets.
6. Transfer Assets: Move the assets you want to include into the trust. This can be property, investments, savings, or other valuables.
7. Register the Trust: If necessary, register the trust with HMRC and make sure it meets all legal requirements.

How Can GloverPriest Help?

At GloverPriest, we provide friendly and transparent advice on the best way to organise and manage your assets. Our specialist Trust Solicitors are here to carefully draft the wording of your trust so it accurately reflects your circumstances and needs.

If you would like help with trusts, speak to one of our expert lawyers today - complete our enquiry form here.