Do I Need a Solicitor For a Trust?

The establishment of a trust can be one of the most important financial decisions that an individual chooses to make. In many cases, the trust might not actually affect the settlor (the individual who has established the trust) to any practical extent during their lifetime, but will have an impact on the lives of the beneficiaries.

Some ‘living trusts’, however, can have a significant bearing on the financial position of the settlor. As a result, in either circumstance it is vitally important that a trust is constituted in a legally acceptable way.

Constitution

A brief look at the ways in which a trust can be constituted should give some idea of whether or not the services of a solicitor are required. In the first instance, it should be noted that a written declaration of establishment (known as the ‘trust instrument’) is not necessarily required. Indeed, a spoken declaration is legally sufficient for the constitution of a trust.

However, there are a number of problems with this method; primarily, it is very difficult to prove the content of a spoken declaration after the event, particularly after the death of the settlor. As such, this method of constitution is far from ideal.

A far safer option is to codify the terms of the trust. A trust instrument can be used to ensure that all parties concerned know exactly what is occurring. Aside from clarity amongst the parties, a clearly written trust instrument ensures that any subsequent legal conflict can be easily solved. There are, in fact, very few legal restrictions on the form that this document can take; there are a very small number of conventions regarding the wording or format.

However, there are a number of elements that must be included in a valid trust instrument. At the very minimum, the document must demonstrate a doubtless intention on the part of the settlor to constitute a trust; it must identify precisely and unequivocally the assets that are to be placed in trust; and it must identify the settlor, trustees and beneficiaries.

Instruments and Convention

While there is no explicit legal necessity for the document to follow a particular format, a generally accepted form has developed through years of case law and tweaking. As such, trust instruments now tend to follow a fairly specific pattern. This convention is self-perpetuating, as documents are now written according to these guidelines in order to ensure that they are readily understood by the legal community.

Clearly, some working knowledge of trust law is necessary to ensure that the document is drawn up in accordance with this convention; for this a solicitor will almost certainly be needed.

It should also be noted that the constitution of the trust is not the only area in which advice might be sought. Assets in trust are almost always treated differently for tax purposes than those outside of trust – indeed, this is frequently the reason that an individual chooses to establish a trust at all.

However, the applicable tax schedules can be complicated, particularly as assets of different types can be treated differently. Again, for financial reasons, it is therefore almost always a good idea to seek professional advice when considering the option of a trust.