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The Role of the Settlor in a Trust

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Trusts and Settlors: Jack Ross Explains

Introduction: Understanding Trusts and the Settlor’s Significance

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A trust is a legal arrangement that allows a settlor to transfer assets to a trustee for the benefit of one or more beneficiaries. This arrangement is especially used in estate planning and can offer various benefits, including asset protection and tax advantages. The settlor, sometimes known as the grantor or trustor, plays a crucial role in establishing the trust and deciding its terms. This article delves into the role of the settlor in a trust and offers professional advice on what setting up a trust may entail for the parties involved.

What is a Trust?

A trust is a legal arrangement where a person, known as the settlor, transfers a settled sum or property to a trustee. The trustee then manages the trust assets for the beneficiaries according to the trust’s terms and conditions set out in a document called the ‘trust deed’.

Who is the Settlor?

The settlor is the person who creates the trust. The settlor decides how the assets in the trust should be used and may sometimes also benefit from the assets. The settlor’s role is codified in the trust deed and reflects the settlor’s wishes.

Key Roles and Responsibilities: The Role of the Settlor

Creating the Trust

The settlor creates the trust by transferring assets or a settled sum to the trustee. This action is essential for the initial establishment of a valid trust.

Setting the Terms

The settlor decides the terms of the trust, which are usually set out in a document called the trust deed. The terms include how the trust assets are to be managed and who may benefit from the trust.

Choosing the Trustee and Beneficiaries

The settlor selects at least one trustee and one beneficiary. The trustee has the fiduciary responsibility for managing the trust assets, while the beneficiary is the person or entity that stands to benefit from the trust.

Revocable vs Irrevocable Trusts

The settlor must decide whether the trust is revocable or irrevocable. Revocable trusts can be altered or revoked by the settlor, whereas irrevocable trusts cannot.

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Different Types of Trusts and the Settlor’s Role

Discretionary Trust

In a discretionary trust, the settlor gives the trustee the power to decide how to distribute the income of the trust among the beneficiaries.

Living Trust

In a living trust, the settlor transfers assets into the trust during their lifetime. Sometimes the settlor can also benefit from the trust, which is then called a ‘settlor-interested’ trust and has special tax rules.

Revocable Living Trust

In this type of trust, the settlor retains the ability to revoke or alter the trust’s terms during their lifetime.

Legal and Tax Considerations: Get Advice from a Solicitor

Legal Advice

If you are considering setting up a trust, it is advisable to get advice from a solicitor to ensure that the trust meets your needs and complies with the law. Solicitors can guide you through the complex landscape of trusts, including the many different types that can be set up depending on how you want to control your assets.

Summary: The Settlor’s Pivotal Role in a Trust

The settlor plays a significant role in establishing and defining a trust. From selecting the trustee and beneficiaries to setting the terms and type of trust, the settlor’s decisions shape how the trust operates. 

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Establishing a living trust involves creating an agreement between yourself (the Settlor) and another individual (the Trustee) who agrees to manage your assets for your benefit. It is important that terms are clearly defined in this agreement including details such as what might happen if you are asked by creditors for payment; who would be beneficiaries; what kind of assets are included in the trust; and details of how assets should be managed for maximum security.

Setting up a living trust can feel like an uphill task but with professional help on hand it can easily become something much simpler and stress free. Our team here at Jack Ross are always available for advice on setting up living trusts and other types trusts if you are ever unsure.

Yes there are many different types of trusts depending on what kind of property or assets you invest into it as well as who the intended beneficiary/s may be. Different kinds include bare trusts, interest in possession trusts, accumulation & maintenance trusts, life interest or life tenancy trusts etc.

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