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20 October 2025

Your Questions Answered: How Do I Set Up A Trust To Protect My Assets?

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Shepherd and Wedderburn LLP

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Shepherd and Wedderburn is a leading, independent Scottish-headquartered UK law firm, with offices in Edinburgh, Glasgow, Aberdeen, London and Dublin. With a history stretching back to 1768, establishing long-standing relationships of trust, rooted in legal advice and client service of the highest quality, is our hallmark.
So, you're thinking of creating a trust. You might wish to do that for tax reasons, or because you are concerned with protecting your assets for the future. Perhaps your priority is managing assets for a vulnerable loved...
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So, you're thinking of creating a trust. You might wish to do that for tax reasons, or because you are concerned with protecting your assets for the future. Perhaps your priority is managing assets for a vulnerable loved one, or even pursuing charitable objectives. Whatever your motivation, the process of creating a trust can feel daunting, and the prospect of transferring asset to the management of others, quite alien. In this article we provide a step-by-step guide to the key aspects of trust creation and highlight the important role of the professional advisor throughout the process.

Step 1: Choosing your trustees and beneficiaries

When you set up a trust, the trustees become the legal owners of assets held within the trust. They must take responsibility for managing these assets while exercising certain duties, known as their fiduciary duties.

While you may already have your beneficiaries in mind, the decision of who to choose to act as your trustees is just as important. It is crucial that you select people you trust, and who have the appropriate skillset to effectively manage the trust assets. This may be a family member, a friend, or indeed, you may wish to include yourself. Fundamentally, the trustees must understand their role and be content to take on the significant responsibility it entails.

There are a number of other key considerations when appointing the initial trustees, including how many you should include. Appointing a sole trustee may be possible, but it is generally inadvisable given the complications that would arise if that sole trustee were to die or lose capacity. By contrast, appointing too many trustees can hinder efficiency, especially when it comes to signing trust paperwork or arranging trustee meetings.

The general rule is that trustees are able to make decisions by majority in Scotland, meaning that it is often sensible to appoint an odd number to avoid disagreements turning into stalemates. It follows that three may well be the magic number when it comes to appointing your initial trustees, but much will depend on the circumstances of the case.

With that said, it is sensible to choose trustees who you feel will work well together, and including a professional among the trustee body can provide not only an element of useful experience, but a neutral voice when difficult decisions require to be made. Shepherd & Wedderburn operates trustee companies to regularly perform this function.

On the other hand, your trust's beneficiaries are just as important, as they will ultimately receive the trust assets/income. This could be immediate family members or their future descendants. However, trusts can also cater for charities or even friends. Where children will benefit under a trust deed, special wording can also be added to ensure that any beneficiaries under a certain age do not inherit until they are old enough.

Your trust's beneficiaries can also include yourself, but it is important to note that making yourself a beneficiary may have an effect on any potential tax planning benefits of the trust and therefore, may not be appropriate for everyone's circumstances.

Step 2: Drafting the trust deed

Once you have established the type of trust you require, decided upon your trustees and beneficiaries, and are satisfied that it is cost effective, the next step is to have the trust deed prepared. When doing so, it is important to consider the purposes of the trust and what it is that you're trying to achieve, to ensure that the drafting meets your aim.

The trust deed sets out the terms of your trust, such as who your trustees and beneficiaries are, the trust purposes, and what powers the trustees have.

This document will govern the trust throughout its lifetime, and it is essential that it accurately reflects your wishes – instructing a professional to prepare your trust deed (rather than using, for example, an online pro forma) is the best way to ensure that you end up with a valid trust which operates as you want it to.

The deed will be signed by you, as well as by the trustees in most cases (in order to indicate that they accept their new role).

Step 3: Transfer of assets

You now have a trust deed which sets down the terms of your prospective trust – but the process isn't yet complete. Your trust is only formally created when you transfer assets to your trustees to hold as trust property.

People put lots of different types of assets into trust. This includes property/houses, a business, shares, or cash – the options are (almost) endless. The process of the transfer therefore depends entirely on which assets are to be held in the trust. For example, if heritable property is being transferred into the trust, conveyancing solicitors will be able to assist with a disposition, to be registered in the Registers of Scotland.

It is important to note that any assets, once transferred into your trust, are now legally owned by the trustees and not by you. Your trustees are still required to manage these assets in line with their "fiduciary duties" and for the benefit of your beneficiaries. These assets are also likely to be taxed differently than if they were owned by you personally. Tax compliance, including the inheritance tax and capital gains tax treatment of placing assets into trust, is one of the most complex aspects of trust creation/administration, and usually requires professional advice.

Step 4: HMRC's Trust Registration Service (TRS)

HMRC's Trust Registration Service (TRS) is a register of the beneficial ownership of trusts. While there are specific exclusions, generally, all trusts are now required to register via the TRS portal. For your new trust, this registration should be completed as part of the initial setup process, either by the 'lead trustee' (i.e. the one who is most involved with trust matters) or by a solicitor. It is also important to keep the register up to date over time.

Ongoing Trust Management

Once the trust is up and running, the role of the trustee carries a lot of responsibility. The trustees must look after the trust property, administer it for the benefit of the beneficiaries, and make decisions. Ongoing record-keeping will also be required – for example, appropriate minutes should be kept to record trustee decisions, and trustees are also obliged to keep trust accounts. The ongoing tax and administrative costs connected with the trust may well be prohibitive depending on which assets are to be placed into trust and this should be analysed to determine whether a trust is the most appropriate and cost-effective option. Seeking independent legal and associated tax planning advice is essential in order to ensure that your trust is effective and fit for purpose.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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