Trust funds are not just for the mega-rich: Here's how they can benefit many ordinary people – James MacKinnon

A little-known legal centenary this month marks the modern development of an incredibly vital part of how we can protect our assets for future generations.

You don't need to own a super-yacht to think about setting up a trust (Picture: Ross Land/Getty Images for Dagoc)

When it comes to organising our affairs in event of our death, most of us know about wills and the nature of what that involves. However, part of the planning process involves another legal element which people are less familiar but which can bring great benefits – trusts.

Trusts have been common in Scotland since around the 17th century but there have been no significant legislative changes to trust law since the Trusts (Scotland) Act was enacted in August 1921.

It needs to be modernised but it is not just a legal technicality – trusts are a vital part of how we can manage our financial affairs. But why should we care and why would you need one?

They can immediately bring to mind something for the rich and, whilst they were predominantly used by wealthy individuals in days gone by, today they are used for more normal purposes, and not just by the super-yacht fraternity.

Succession planning is a notable area and one which, increasingly, more of us need to be aware of.

Being able to move assets down the generations is a natural human desire, as is wishing to retain some control, either because a beneficiary is young or you are uncertain who to leave the asset to and need time to consider.

Tax (particularly capital gains tax) is often a barrier to gifting and a trust can provide a vehicle to pass on assets without incurring an initial tax charge.

You may wish to provide for your spouse after your death but want your children, perhaps from an earlier marriage or relationship, to ultimately inherit.

Rather than transfer your assets to your spouse and place them at risk if your spouse requires care in the future, transferring them to a trust can allow your spouse to retain a benefit from the assets whilst excluding them from any future care-fee assessment.

This retains the value of your estate for your children, undoubtedly a priority for many, many people.

Another area which could affect individuals and families is inheritance tax. We may not think this will affect us, however with the substantial increase in house prices, it is not unusual for individuals to unknowingly breach the inheritance tax threshold.

In addition, where there are vulnerable beneficiaries, where age, capacity, undue influence, debt or addiction might be an issue, a trust can bring security in helping to manage these situations.

Gifting assets to a trust allows the trustees to hold these assets for your children until a future date.

Trusts are definitely not just for the mega-rich but a tool available to all of us, providing some control over what happens to our assets.

They can be a complex area of the law and it goes without saying that you should take advice from an experienced trust lawyer before making any decisions.

All of us would like to leave some sort of financial legacy if we can, so maybe it’s time to put some trust in your future.

James MacKinnon is head of private client at Aberdein Considine

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