If you put money or property in a trust it no longer belongs to you. Any cash, property or investments belong to the trust and will be outside your estate for inheritance tax purposes and may not count towards your inheritance tax liability when you die.

Another potential benefit is that a trust is a way of keeping some control and protecting the assets for the beneficiary. A trust avoids handing over valuable property, cash or investments whilst beneficiaries are still relatively young.

Putting some of your savings in a trust for children is one of the most common reasons why people set up a trust.

There are two important roles in a trust.

The trustee is the person who owns the assets in the trust. It’s a trustee’s role to manage the assets responsibly and they have a legal duty to look after the trust assets for the person who will benefit from the trust in the end.

The beneficiary is the person who the trust is set up for and someone who is usually unable to manage the assets themselves because they are too young or vulnerable.

There are several types of trust. Setting up a basic trust will be relatively inexpensive. Others are more complex and would require more specialist advice. The type of trust you choose depends on what you want it to do. These are the most common.

A bare trust is the simplest type of trust. It gives everything in the trust to the beneficiary who is able to access it as soon as they are over 18.

A discretionary trust gives the trustees absolute power to decide how the assets are distributed. This is often used by grandparents who leave the distribution to trustees who are usually the grandchildren’s parents. They make the investment decisions and decide how and, more importantly, when the income and capital is distributed between the grandchildren.

An interest in possession trust is a popular structure of trust used in wills of people who remarry after divorce and who have children from their first marriage. Here the beneficiary can receive income from the trust but doesn’t have a right to the assets that generate the income. This type of trust is often set up with your partner on the understanding that when they die the assets in the trust will then pass to your children.

When arranging a trust it is necessary to decide what assets are to be included in the trust and who are the trustees and beneficiaries. You need to decide when the trust becomes effective; immediately or on your death.

Setting up a trust is often combined with arranging a will, with the executors of the will also acting as the trustees. It is quite usual for assets in the trust to include a life insurance investment bond as this is a particularly useful investment vehicle to hold within a trust.

Trust law is complicated. It is always recommended to get professional advice before setting up a trust. An independent financial adviser, solicitor or professional will writer should be able to help.