Quilter 9 Trusts are created for various reasons. These include the control of gifted assets, i.e., who might receive them and when, or to reduce potential tax liabilities. Generally a trust will provide for one of the following: the beneficiaries to have an absolute right to income and capital – see bare trust on page nine the beneficiaries to have an entitlement to income only the beneficiaries to have a right to income but the trustees to have the power to advance capital to them, or the trustees to have discretion over whether they pay income or capital to any beneficiary. It is vital to understand the type of trust you are a trustee of and what the trust allows you to do before attempting to decide on an investment solution. There are special provisions for trusts created on death under a Will, which include: Age 18 to 25 trusts Trusts for Bereaved Minors Immediate post death interest trusts Each has special tax considerations which are not covered in this guide. Please speak to your legal or financial adviser about these arrangements. Under a bare trust , assets are held by the trustees for one or more named beneficiaries, usually minors, who are absolutely and unconditionally entitled to any income arising and the capital. The trustees usually hold the assets on behalf of the beneficiaries until they are legally entitled, and able, to receive it. Under an interest in possession trust, one or more named beneficiaries have an immediate right to income (i.e., an interest in possession) and any income arising within the trust is taxed as their own. Under such trusts, a beneficiary’s interest can sometimes be changed in favour of someone else, either by the trustees or automatically on the death of the beneficiary. Under a discretionary trust , the payment of income and capital is at the complete discretion of the trustees. There are often no named beneficiaries. Beneficiaries will be selected from one or more classes specified in the trust wording (for example, ‘my grandchildren’ would take account of existing grandchildren and those unborn at the time the trust was established). No beneficiary is absolutely entitled to any of the trust fund and as such it does not form part of any one beneficiary’s estate. This may provide a level of protection of the trust assets against wasteful beneficiaries or third-party claims from non- beneficiaries. The most frequently encountered trusts are: Bare (sometimes known as absolute) Interest in possession Discretionary