Bare trusts are a type of trust that is usually set up by parents for the benefit of their children or grandchildren. Assets are in the name of the trustee responsible for administering the assets. The beneficiaries have the right to the income and capital generated at any time. They have to be of the appropriate age to benefit. The acceptable age is 18 years for those in England and Wales, and Scotland individuals have to be 16 years old to be the sufficient age as a beneficiary. The trustees protect the assets until the beneficiary is old enough to deal with their affairs.
a). Protect the assets and act prudently;
b). Generate maximum benefit as prudently as possible taking into consideration the rules, legalities and regulations that apply;
c). Not influence or determine how the income or trust's capital generated.
Advantages of Bare trusts:
a). Offer tax advantages to the settlor;
b). Beneficiaries might benefit from tax exemptions if they are of low income;
c). Beneficiaries can determine when it is convenient to access as long as they are of an acceptable age, and
d). There are no restrictions on how the beneficiaries can use their capital or income; however, they deem fit.
The contributions or the implications of the bare trust on the trust market:
Bare trusts administered as the deed of settlements or declaration of trust. The process of setting up a deed of settlement or declaration of trust results in the creation of employment and the expansion of the trust market. The beneficiaries have to declare and pay tax. The tax payment process creates jobs and results in the growth of the trust market. The expansion of the market results in economic benefits. These benefits are across countries, jurisdictions or territories in which these products or services operate. This type of trust could result in an inheritance tax bill, depending on the situation or circumstances—administration of the inheritance tax can result in the expansion of the trust's market.
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