If you’re in the middle of your playing career and you have children, you may be thinking about the best ways to organise your finances now to protect them in the future. In that case, you may want to consider setting some of your wealth aside in a trust.
A trust is a legal framework that allows you to manage assets for someone else. When you create a trust, you (known as the “settlor”) set money or other assets, such as investments or property, aside for someone of your choice known as the “beneficiary”.
You then appoint an individual, known as the “trustee”, to oversee this wealth on behalf of your beneficiary.
This information is typically set out in a document called a “trust deed”.
Trusts can certainly be a useful tool for protecting your children’s future. However, they are also quite complex and come with some key considerations to understand before you create one.
So, read these four key things to know about trusts if you intend to use one for your children.
1. Money or assets in trust are completely secure for your chosen loved one
First and foremost, one of the main features of trusts is that the money or assets in them are held securely for your chosen beneficiaries.
This means the assets are entirely protected and guarantees that only your children will benefit from the wealth in trust, whether that’s money, investments, or whatever else you want to pass on.
On the other side of this, you can set up the terms of the trust in the deed to limit your child’s access to the assets as you see fit, perhaps by age or by how much of the wealth is legally theirs.
You might do this if you want to provide money to your children in future, but equally want to ensure that they use it wisely and don’t waste it while they’re still young.
You should bear in mind that any investments held in trust can go down as well as up in value, so you could get back less than you invested. Past performance is not a reliable indicator of future performance.
2. You’ll need to elect a trustee to oversee the money or assets
Selecting a trustee is a vital part of setting up a trust. When doing so, you need to choose a safe pair of hands who you have total confidence in to always act in the best interest of your children.
Crucially, your trustee will typically need to be comfortable dealing with money and financial matters. This is because being a trustee comes with key responsibilities, including:
- Keeping accurate records
- Paying any tax due on the fund
- Managing investments or other fund assets, such as property
- Giving beneficiaries access at the correct time.
While this can be left to anyone of your choice, it’s often most sensible to give this task to a professional who will be able to carry out your wishes with expertise.
3. There are various types of trust available
There are various kinds of trusts you can use to ringfence money and protect it for your child’s future. Some of the main types of trust include:
- Bare trust – Your child will have the right to all capital and income once they turn 18 (16 in Scotland)
- Discretionary trust – Your trustee will make decisions about the trust’s income and capital, such as when to pay out to your child and how often. These are often used for beneficiaries who are not capable of looking after themselves.
- Accumulation trust – Your trustee accumulates any income within the fund to add to its value. They may also be able to pay this out, as they can with a discretionary fund.
- Interest in possession trust – Your trustee must pass any income directly to your child. However, your child doesn’t have a right to the rest of the trust property.
Of course, as each trust has different key features, the right kind will typically depend on your personal circumstances.
4. You can retain control over the money held in trust
A concern many people have over using trusts is in putting too much value into one and then realising you need access to it in future.
Fortunately, it’s possible to create what’s known as a “settlor-interested trust”, allowing you to benefit from the trust property without specifically being named as a beneficiary.
You could easily end up putting too much of your money into your child’s trust. For example, imagine you put money in trust for your child during your playing career, and some of your other investments don’t perform as planned when you come to retire.
As your income has dropped since you stopped playing and you’re waiting for these investments to increase in value, you might be caught short in not having sufficient funds to live your desired lifestyle.
In this case, retaining some measure of control over the money held in a trust could be useful.
Get in touch
Want to find out the best ways to secure your wealth for your family’s future as a professional footballer? Get in touch with us at ProSport.
Email email@example.com or call 01204 602909 to speak to an experienced adviser.
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a reliable indicator of future performance.
The Financial Conduct Authority does not regulate estate planning, tax planning or will writing, or trusts.