What Does The Law Says About Beneficiary Trusts?

Every person has a dream of planning a secure future for his family. No one knows when he might die so people try to plan for future in a way to provide security to their partners, children and even relatives. People mostly use wills to provide this safety net. Wills ensure the division of wealth and the rest of the belongings the way a person would want it after his/her death.

However, some people are not satisfied with just a simple will to settle the property matters amongst their heirs. They want a secure and more feasible arrangement that comes in the form of a trust. Additionally, in some cases, they do not have grown up heirs and are afraid of scheming relatives or friends who could usurp the property by trapping the poor kids. To avoid any such mishap, they have no other option but to set up beneficiary trusts.

Beneficiary trusts, as the names suggest, are trusts in the name of a beneficiary and are managed by a trustee, as chosen by the settler. Laws in the United Kingdom state that a settler has to clearly define the nature of the beneficiary trust and the extent of power a trustee can exercise.

Bare Trust

The most commonly used beneficiary trust in the bare trust. It is used to provide the beneficiaries with the complete handover of real estate or any other kind of assets. Usually a person is appointed as a trustee and is given full control, but he/she is bound to transfer this control of the assets to the beneficiary when they fulfill the criteria. Normally, it is used to safeguard the rights of children under 18, and a reliable person is chosen as a trustee who then transfers all the assets to them after they get to 18 or above, according to the laws of the UK. Being underage is not a compulsion for this kind of a trust. It can also be used for adults who can receive the assets whenever they want.

Interest in Possession trust

In this type of trust, the beneficiaries do not have proprietary control over the assets, but can take all the interest and profits available on these assets.

Discretionary trust

In this kind of trust, the trustee is given a free hand to secretly divide the assets in any proportion they feel fit, among the beneficiaries.

Mixed trust

If the beneficiaries have a range of different ages then a mixed trust can be formed. In this scenario the trust would be formed for the benefit of children still under age after the first one of them reaches adulthood. The adult child would be entitled directly to an interest in the possession and the remaining children would be bound to the mixed trust.

Accumulation and Maintenance Trust

Accumulation and maintenance trust is another type of trust used to help minors. It is used to protect minors until they are legally adults.