The Trust Registration Service (TRS) received 38,000 new trust registrations between 1 April 2021 and 31 March 2022. When it comes to protecting and managing assets, many people are asking what is a trust agreement.
As established and reputable Solicitors in South Wales, our experts have put together this quick and simple guide to help you understand what a trust agreement is, how it is set up and works and who it’s for.
A trust agreement is a legal document containing, terms, conditions and provisions that allows the trustor to transfer the ownership of assets to the trustee to be held for the trustor’s beneficiaries. The trustees will manage the property and assets on behalf of the beneficiary.
That’s the simple answer, but let’s dive into more details.
A trust agreement is a legally binding document that serves as the governing document for a trust.
It is commonly used to safeguard the assets in a trust and ensure they are managed and distributed to the intended beneficiaries, in accordance with the trustor’s wishes.
The trust agreement outlines the roles and responsibilities of trustees, how funds will be distributed, and any legal requirements that must be followed.
The trustee may be a person, an organisation, or even a bank.
Anagreement contains three key components. Here’s an outline of what those elements are.
The major components of a trust agreement include:
It also details the rights and responsibilities of both parties, as well as any conditions or limitations on them.
The agreement is usually written by a Solicitor and should include an introduction stating who created the trust, what its purpose is, and when it will come into effect.
It should also include the details of any parties involved, such as the Trustee (the individual responsible for managing and administering the trust) and the Beneficiaries (those who benefit from the trust).
If you’re interested in finding out more then Robertsons Solicitors have been helping to register trust agreements for many years. Give us a call now and we can help answer questions specific to your needs and requirements.
It is a contractual document that establishes the terms of a trust, which is an arrangement in which you transfer some or all of your assets to a third party (the trustee) to manage and disburse according to your wishes.
It contains the terms, conditions and provisions under which the creator of the trust (known as the settlor or trustor) transfers their assets to trustees who will manage the property on behalf of the beneficiaries of the trust.
To answer the question “what is a trust agreement” it’s worth outlining the types of trusts that a trust agreement would be created for.
In general, there are three main types of trusts and a trust agreement is required for all these instances to manage and oversee them.
Living or testamentary trust
A living or testamentary trust is created during the lifetime of the person who created it. The trust document states the terms and conditions of the trust, including how assets should be managed and distributed upon their death.
Revocable or irrevocable trusts
Revocable trusts are created during the lifetime of the grantor (the person who creates the trust) and can be revoked at any time. Irrevocable trusts cannot be changed or terminated once they have been set up.
Funded or unfunded trust
A funded trust has assets such as cash or investments that have been placed into the trust. An unfunded trust only has the legal document setting it up and no assets associated with it.
The agreement will outline the trustee’s duties and responsibilities, such as how to manage the assets and make decisions regarding:
They are mainly used by individuals, businesses and organisations to hold assets or funds securely.
Trust funds are designed to provide legal protection of the principal amount and ensure that it is managed as intended.
They can be set up for any purpose, such as to protect vulnerable beneficiaries, provide long-term care for children, or to regulate business investments.
Trusts can also be used by businesses, partnerships and charitable organisations to streamline the management of assets and funds.
Generally speaking, trust agreements are most commonly used in estate planning, to ensure that assets can be passed on to future generations in a tax-efficient manner.
They’re also used to protect the interests of minors or individuals who are unable to manage their finances.
When setting up an agreement, it is important to consider the purpose of the trust, its management, and who will benefit from it.
The trust agreement should specify how the trust is to be managed and by whom. It should also include details about where the trust funds will be stored, who can access them and how, when and under what direction they are to be managed and distributed.
The trust agreement should also specify the duties of the trustee (the person or entity in charge of managing the trust).
These may include a duty to manage investments prudently, keep accurate records and follow the terms of the trust agreement.
Trust agreements are often used when someone wants to protect their assets or pass them on to beneficiaries after death.
They can also be used for charitable donations, as well as for tax and estate planning purposes.
Often they are also used to provide for the care of minors or developmentally disabled individuals.
The agreements can provide a range of benefits, including protecting assets from creditors, avoiding probate court fees, and making sure assets are distributed according to the grantor’s wishes.
They can also provide a measure of control over how assets are used and managed. Trusts can be designed to last for just one lifetime or they could be designed to continue in perpetuity.
Trust agreements are not just for the wealthy.
Many different types of people, including business owners and middle-class families, may benefit from setting up a trust agreement.
In general, anyone who wants to protect their assets or pass them on to beneficiaries after death should consider creating a trust agreement.
Creating an agreement is generally something that should be done when you have sufficient assets to protect, or if you are planning for the future and want to control how your assets will be used.
If you’re looking to protect your assets from creditors, create tax advantages, and provide for beneficiaries after death, setting up a trust agreement may be a good option.
An agreement is also beneficial for families with young children since it can provide the beneficiaries with security if early in their life something were to happen to you.
Additionally, if you have a business that you plan on leaving to family members or other heirs, setting up a trust agreement will help ensure its success.
Trust agreements are registered for a variety of reasons, including to:
The agreement will detail how assets should be distributed after death and can include instructions on who is to manage the trust and how funds should be disbursed.
In some cases, a trust may also specify or restrict certain activities that could otherwise negatively affect its beneficiaries.
So now you have an answer to the question “what is a trust agreement”. You might be considering arranging one yourself. It’s relatively easy to get started.
To get your trust fund started and your trust agreement drawn up, contact Robertsons Solicitors today so we can help you navigate through the process.
