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Settlor
The person who creates the trust and transfers the first assets. The deed records what the settlor intends and which powers, if any, the settlor keeps.
Education
What is a trust? The plain guide
What is a trust? It is a legal arrangement in which a settlor transfers assets to a trustee, who holds them for named beneficiaries under the terms of a written deed. This guide explains the parties, the main types, how one is set up and what drives the cost.
What a trust is
A trust separates two things that usually go together: holding an asset and benefiting from it. The trustee holds legal title and must act within the deed and the law that governs it. The beneficiaries have the right to benefit in the way the deed sets out.
Because the trustee holds the assets, a trust can carry on when the person who created it dies or can no longer decide for themselves, and it can hold assets in more than one country.
What happens is set by the deed, not by the label on the trust, so the wording of the deed matters most.
The parties: settlor, trustee, beneficiary, protector
Trustee
The person or company that holds the assets and runs the trust under the deed. A professional trustee keeps the records, checks each instruction against the deed and approves distributions.
Beneficiary
A person, or a class of people, that the trust benefits. The deed names them or describes the class and says when and how they may receive benefits.
Protector
An optional person who watches over the trustee. The deed may let the protector appoint or remove trustees or give consent before certain decisions.
The main types of trust
Common types of trust, what each does and where it fits
| Type | What it does | Where it fits |
|---|---|---|
| Discretionary trust | The trustee decides which members of a named class receive what, and when, guided by a letter of wishes. | Families who want flexibility as circumstances change. |
| Fixed interest trust | The deed fixes each beneficiary’s share, so the trustee has little say over who receives what. | Cases where the shares are agreed in advance. |
| Reserved powers trust | The deed lets the settlor, or someone they name, keep chosen powers such as directing the investments. | Settlors who want a trustee to hold and record without giving up every decision. |
| Family trust | Holds family assets for later generations under rules written in the deed. | Succession across several people or countries. |
| Purpose trust | Exists for a purpose, not for people, where local law allows it. An enforcer holds the trustee to it. | Holding a company or a family heritage asset. |
| Life insurance trust | Owns a life policy so that the proceeds are paid under the trust’s terms. | Policies meant for a family rather than an estate. |
| Standby trust | Set up in advance with little or nothing in it, then funded when an agreed event happens. | Planning for a later change in circumstances. |
| Immigration trust | Created before a move to a new country of residence so that the trust is settled in advance. | People about to move, who first take advice in the destination country. |
How it works
How a trust is set up
Decide the purpose and the people
Write down who the settlor, the beneficiaries and any protector will be, and what the trust is for.
Choose the governing place and the trustee
The law of the chosen place governs the trust, and the trustee must be willing and able to act under it.
Draft and agree the deed
The deed sets the powers, the duties, how distributions are made and what happens if someone cannot act.
Pass the trustee’s checks
The trustee confirms who everyone is and where the assets come from before it accepts the role.
Sign and transfer the assets
Once the deed is signed, the assets are transferred to the trustee and the trustee opens the records.
What a trust costs to run
Costs fall into three groups: setting up the trust, running it each year, and one-off events such as changing trustee or making a large distribution. Each group depends on the structure, the assets, the places involved and how far the deed is tailored.
We publish the set-up fee for each place; annual administration and event-based work are quoted after we review your case. A quote shows the charges for your case, with a reference code, its date and the assumptions behind it.
FAQ
Common questions about trusts
What does a trust do?
A trust keeps assets under the rules of a deed, apart from the trustee’s own property, so that they can be looked after and passed to beneficiaries as the deed provides. It can set conditions, such as payments in stages, and say who steps in if the trustee cannot continue. It does not replace tax or legal advice.
How does a trust work?
The settlor moves assets to a trustee, who holds them under the deed and pays or applies them for the beneficiaries as the deed says. The deed also holds the trustee to account: beneficiaries can usually ask a court to enforce it. If the trustee retires or is removed, the deed says who appoints the next one.
What is a trust deed?
The trust deed is the signed document that creates the trust. It names the parties, lists the powers and duties of the trustee, says who may benefit and when, and names the governing law. Courts and trustees read it first whenever a question comes up, so it is worth drafting with a lawyer.
What does trust fund mean, as opposed to a trust?
It is the pool of assets that a trustee holds under a trust. It can contain cash, property, shares in a company or other assets. The word fund describes the pool and does not mean an investment fund, and it says nothing about how the assets are invested or by whom.
How do beneficiaries get money out of a trust fund?
The deed decides. Where a beneficiary has a fixed entitlement, the trustee pays it on the dates or events the deed names. Where the trustee has discretion, the beneficiary asks and the trustee decides, guided by the deed and any letter of wishes. The trustee keeps a record of each payment.
Trust glossary
Bare trust
A trust in which the trustee holds assets for one or more adult beneficiaries who together can call for the assets, so the trustee has no discretion. Rules vary by place.
Constructive trust
A trust that a court imposes, rather than one created by a deed, usually so that a person cannot keep a benefit they should not keep. It is a legal remedy, so ask a lawyer.
Corporate trust
A trustee role for a company’s debt, such as bonds, where the trustee acts for the holders. It is a different service from a family or wealth trust.
Financial trust
A plain description of a trust whose main assets are financial, such as cash, shares and bonds. It is not a separate legal type.
Governing law
The law of the place that decides how the trust is read and enforced. The deed names it.
Letter of wishes
A non-binding note from the settlor that tells the trustee how the settlor hopes discretion will be used. The trustee considers it and is not bound by it.
Reserved powers
Powers that the deed leaves with the settlor or a named person, for example to direct the investments or to remove a trustee.
Next
Where to go next
Trustee services
See the six services, what a trustee does in each and what it leaves to your advisers.
Browse trustee servicesFamily trusts and succession
How a trust fits succession planning across several people or countries.
Plan for successionPlaces to hold a trust
All the places we cover, with sources and the date each fact was read.
See all placesQuestions answered
Short answers on setting up, legality, tax in outline, cost and timing.
Read the trust FAQNews and updates
Dated changes that can touch a trust, with who is affected and what to do.
Read the insightsFind the place that fits
8 short questions that suggest a trust type and the places that offer it.
Try the finderUK Inheritance Tax: the long-term resident rules
A dated update on who is affected and what to do.
Read the updateReady to talk?
Our Hong Kong trust team takes you through the next step.