Common Myths About Trusts in Scotland Debunked

Trusts are a common legal tool in Scotland, often used for estate planning, protecting assets, or ensuring that loved ones are provided for. However, despite their usefulness, there are many myths and misconceptions surrounding trusts that can create confusion. In this article, we will debunk some of the most common myths about trusts in Scotland.

Myth 1: Trusts Are Only for the Wealthy

One of the most persistent myths is that trusts are only relevant for the very wealthy. While it’s true that trusts have historically been associated with the rich, they are increasingly used by people from all walks of life. Trusts can be an effective way to manage assets, protect vulnerable beneficiaries, or provide for children or grandchildren. You don’t need to have vast amounts of wealth to benefit from a trust.

Myth 2: Setting Up a Trust Means Losing Control of Your Assets

Many people believe that once they place their assets into a trust, they lose control over them. This is not entirely accurate. The level of control you retain depends on the type of trust you establish. For instance, if you set up a discretionary trust, the trustees have the flexibility to decide how and when to distribute the assets, but this is usually based on your wishes as outlined in the trust deed. In other types of trusts, like a liferent trust, the person setting up the trust can retain significant control over the assets.

Myth 3: Trusts Are Complicated and Expensive to Set Up

Another common misconception is that trusts are overly complex and costly to establish. While setting up a trust does require some legal input to ensure it is done correctly, the process is generally straightforward, especially with the guidance of a solicitor. The cost of setting up a trust varies depending on its complexity, but for many, the benefits far outweigh the initial expense. Moreover, once a trust is established, it can help avoid costly disputes or complications in the future.

Myth 4: Trusts Are Only for Avoiding Inheritance Tax

While trusts can be an effective tool for managing inheritance tax, this is just one of their many uses. Trusts can be used to protect assets from being claimed by creditors, ensure that assets are used for a specific purpose (such as education), or manage assets on behalf of someone who is unable to do so themselves due to age or incapacity. They can also be used to ensure that assets are preserved for future generations, providing long-term security for your family.

Myth 5: You Can’t Change a Trust Once It’s Been Set Up

It is a common belief that once a trust has been created, it cannot be altered. This is not necessarily true. While some trusts are irrevocable, meaning they cannot be changed once established, others can be amended or even wound up, depending on the terms set out in the trust deed and the type of trust. In some cases, the trustees may have the power to make changes, or the trust deed might include provisions allowing for flexibility.

Myth 6: Trusts Are Only for After Death

Many people associate trusts solely with wills and estate planning after death. However, trusts can also be set up during your lifetime to manage assets in a way that meets your needs and goals. For example, you might set up a trust to manage property for your children while they are still young, or to provide for a relative with special needs. These types of trusts, known as “inter vivos” or living trusts, can be a practical way to ensure your wishes are carried out while you are still alive.

Myth 7: Trusts Are a Way to Avoid Care Home Fees

There is a widespread belief that putting assets into a trust can help you avoid paying care home fees. However, this is a misconception. If you transfer assets into a trust with the intention of avoiding care home costs, this could be seen as “deliberate deprivation” by local authorities. They have the power to investigate and, if they determine that assets were transferred to avoid care costs, they can still include those assets in your financial assessment.

Conclusion

Trusts are a versatile and powerful tool for managing and protecting assets, but they are often misunderstood. By debunking these common myths, we hope to clarify the realities of trusts in Scotland. If you are considering setting up a trust, it is important to seek advice from a qualified solicitor who can help you navigate the options available and ensure that your trust is set up in a way that best meets your needs.

If you are thinking of your future and you are looking for an experienced solicitor, then please contact our Private Client Team on 01324 622 888 or contact help@randa-fa.co.uk and we would be delighted to assist.