What is a Trust?
A Trust is a legal arrangement that allows you to transfer ownership of assets to trustees to manage for the benefit of chosen individuals or purposes. They help in:
- Financial planning
- Religious giving
- Future security
Why Should You Create a Trust?
Creating a Trust gives you control over how your assets are used, when they are distributed, and who benefits from them, during your life or after your death. Trusts can be a powerful and flexible estate planning tool.
At Axis Solicitors, we understand that protecting your wealth and supporting your loved ones or charitable causes is a key priority.
For trusted and personalised legal advice in establishing Trusts or Waqfs to protect your assets and support your long-term goals, turn to Axis Solicitors. Whether you’re setting up a trust for family, charitable giving, tax planning, or religious purposes, our expert solicitors provide straightforward, tailored support.
Benefits of a Legally Compliant Trust
Creating a Trust is an effective way to manage and protect your assets. Without proper planning, your estate could be exposed to unnecessary tax, mismanagement, or legal disputes. A Trust allows you to:
- Ensure assets are used exactly as you intend.
- Provide for vulnerable or young beneficiaries in a controlled way.
- Reduce inheritance tax liabilities and preserve wealth across generations.
- Fulfil religious or charitable obligations in a legally compliant manner.
- Avoid probate delays by transferring assets into trust during your lifetime.
For Muslim individuals, establishing a Waqf ensures that charitable and religious contributions are preserved in accordance with Islamic principles, while remaining legally recognised under UK law. Our expert solicitors can guide you about the process of a trust and its role in your financial management.
Types of Legal Trust Structures
A trust is a distinct legal entity that exists independently of your will or personal property. Treating it separately ensures clarity, enforceability, and protection of assets.
Common trust types include:
Family Trusts
Used to protect assets for future generations, provide financial security for dependents, or manage inheritance over time according to your wishes.
Charitable Trusts (Waqf)
Set up a Waqf to allocate assets for charitable, religious, or community purposes in accordance with Shariah principles and UK law.
Lifetime Trusts
Trusts created during your lifetime to manage and distribute assets, reduce inheritance tax exposure, or plan for care home fees.
- We advise on the appropriate trust structure depending on your objectives—whether you want trustees to control distribution.
Shariah and UK Law Alignment: Ensuring Dual Compliance
Two legal frameworks governing your trust includes:
- Shariah principles: Governing waqf and Islamic trusts
- UK secular law: Governs enforceability, registration, and taxation
A waqf must both satisfy Islamic objectives and be valid under UK trust law. UK law recognises trusts with international or foreign elements under the Recognition of Trusts Act 1987, aligning with global standards for cross-border trusts.
Practical Steps for Dual Compliance
- Draft waqf deeds with both Shariah scholars and UK legal counsel
- Ensure compliance with HMRC registration and reporting
- Understand how taxation differs for charitable vs. non-charitable waqf
Explaining these dual regimes helps Muslim clients meet both religious obligations and legal enforceability.
Trust Administration, Compliance & Ongoing Management
Trustees are responsible for day-to-day management and ensuring compliance. This includes managing trust property, maintaining clear records and accounts, filing all required tax returns, and communicating with beneficiaries. Compliance also involves registering the trust with HMRC, reviewing trust terms regularly, and ensuring that the trust’s purposes remain valid and achievable. Neglecting these responsibilities can lead to penalties or court intervention.
Protecting Assets from Disputes and Future Risks
Trusts can help protect assets from future risks, but legal disputes may still arise. Common risks include creditor claims, divorce or family disputes, challenges to the trust’s validity, and trustee conflicts. Preventative measures include:
- Professionally drafted trust deeds to reduce ambiguity
- Conflict resolution clauses to minimise litigation
- Independent legal advice for trustees and beneficiaries
- Using professional trustees for complex estates
- Aligning trusts with wills and other estate planning tools
Trusts as Part of a Wider Estate and Succession Plan
Trusts are most effective when integrated into a comprehensive estate plan.
This includes aligning the trust with wills, powers of attorney, lifetime gifting strategies, and tax planning. Integration helps avoid probate delays, reduces disputes, and ensures a smooth intergenerational transfer of assets.
For example, a trust holding a family home can coordinate with a will to determine how income or sale proceeds are distributed, while minimising tax exposure and clarifying beneficiary rights.
Role of Axis Solicitors in Creating a Trust
At Axis Solicitors, we offer the following assistance for creating a trust:
- Our team has specialised knowledge in both secular and Islamic trust structures.
- We take the time to understand your objectives and tailor the trust to suit your goals.
- We break down complex trust law into clear, practical steps so you understand how your trust works.
- Knowing your assets are safeguarded in a properly drafted Trust provides long-term security and confidence.
Contact us now for a free initial assessment.
What to Consider While Creating a Trust?
Creating a trust is an important step in protecting your assets and ensuring they are managed according to your wishes. Understanding the key factors before setting up a trust helps make it effective and legally sound.
- Purpose: Family, tax, business, or charity.
- Control: Discretionary or fixed interest.
- Beneficiaries: Individuals, groups, or charities.
- Duration: Length and flexibility of the trust.
By carefully evaluating these considerations, you can create a trust that aligns with your objectives and provides clear guidance for trustees and beneficiaries.
Legal Duties and Responsibilities of Trustees
1. Clear Legal Ownership
- Assets are legally held by trustees, not the settlor or beneficiaries.
- Separation protects assets from personal liabilities or creditor claims.
- Reduces disputes over who owns what after your death.
2. Control Over Asset Use
- Trustees follow your specific instructions for distribution and timing.
- Allows conditional benefits, e.g., age milestones or education funding.
- Ensures charitable or religious contributions are used as intended.
3. Protection from Probate
- Assets in a trust bypass the probate process entirely.
- Beneficiaries can access funds more quickly.
- Avoids public disclosure of estate details.
4. Tax Planning and Efficiency
- Separate trusts can be structured to minimise inheritance or capital gains tax.
- Provides flexibility for lifetime management and adjustments.
- Helps preserve wealth across generations.
5. Beneficiary Protection
- Safeguards minors, dependents with disabilities, or inexperienced individuals.
- Trustees manage assets responsibly until beneficiaries meet conditions.
- Reduces the risk of misuse or financial mismanagement.
Tax Implications of Trusts and Waqf Arrangements
1. Inheritance Tax (IHT)
- Trust assets may incur charges when transferred.
- 10-year periodic charges may apply for some trusts.
- Tax is due when assets leave the trust.
2. Income Tax
- Trustees pay tax on income generated by the trust.
- Beneficiaries may owe tax on distributions received.
- Rates depend on the type of trust and beneficiary status.
3. Capital Gains Tax (CGT)
- Trustees pay CGT when selling trust assets.
- Non-resident trustees may face different rules.
- Certain exemptions may apply for charitable or special trusts.
4. Charitable Reliefs
- Charitable trusts may qualify for tax exemptions.
- Relief can reduce income and CGT liabilities.
- Proper registration is required to access benefits.
5. Planning and Compliance
- Seek specialist advice before creating a trust.
- Understand how settlor and trustee residency affects tax.
- Regular reporting to HMRC ensures ongoing compliance.
