Trusts may be set up for a number of reasons, for example:

• To control and protect family assets
• When someone is too young to handle their affairs
• When someone can’t handle their affairs because they are incapacitated
• To pass on money or property while you are still alive
• To pass on money or assets when you
die under the terms of your Will – known as a ‘will trust’
• Under the rules of inheritance that apply when someone dies without leaving a valid Will (England and
Wales only)

There are several types of UK family trusts, and each type of trust may be taxed differently. There are other types of non-family trusts. These are set up for many reasons, for example, to operate as a charity or to provide a means for employers to create a pension scheme for their staff.

When you might have to pay Inheritance Tax on your trust

There are four main situations when IHT may be due on trusts:

• When assets are transferred or settled into a trust
• When a trust reaches a ten-year anniversary of when it was set up
• When assets are transferred out of a trust or the trust comes to an end
• When someone dies and a trust is involved when sorting out their estate

The treatment of trusts for tax purposes is the same throughout the United Kingdom. However, Scottish law on trusts and the terms used in relation to trusts in Scotland are different from the laws of England & Wales and Northern Ireland.