There are few things in the financial world which are more misunderstood than trusts.

The problem is not so much a technical misunderstanding, more a misperception.

The common perception is trusts are for the very rich, or only of use to save taxes.

This perception comes from the widespread use of trusts by the rich and the uber-rich, often with publicity about how millions have been saved by clever planning which utilises trusts.

However, to say trusts are just for the wealthiest is a bit like saying owning property is only for the wealthy.

The reality is trusts are for everyone, and should be much more widely used. By families, by businesses, by borrowers and by those taking out life assurance.

The word ‘trust’ actually covers quite a few different possible legal documents, some of which can be quite distinct from each other.

However, at a base level what a trust is – and what it does – is provide a protective wrapper around a financial arrangement or asset. This is a layman’s definition, but for the purposes of this article it is enough to say that if you want to protect something and/or provide clear direction over something, a trust could very well be the best way to deal with this.

For example, if you have a life assurance policy with a sum assured of £500,000 payable on death, you may well want to try and make sure that pay-out (a) doesn’t attract unnecessary taxation and (b) ends up in full with your beneficiaries, maybe your children, and not your child’s future ex-spouse after a divorce. Can you stop this from happening? In both cases (a) and (b) – but especially (b) – this is very difficult to control without a trust. Arranging a trust to deal with the pay-out can provide the protective wrapper to ensure the funds stay in the bloodline, and in certain cases, avoid unwanted tax.

Most people have life assurance and trusts should be used more often than not in these cases.

If you have any significant financial value attached to anything (property, life assurance, pensions, shares in a business, oveall Estate Value i.e. your wealth) then there will be one or more types of trust available to help you protect, control and direct how things are passed over or dealt with in the future.

For the uninitiated, which just about means everyone in this case,  trusts can seem complicated and a trust solution daunting. As with many technical subjects, the reality is somewhat different. However, finding the right trust solution for a particular circumstance is the hard part. That’s where an expert comes in.

So, you want to look further and you respect the fact you need an expert, the answer therefore must be to find a good solicitor?

No, the answer is to find a great trust expert and in today’s financial world, in many instances that will be an independent financial adviser. The reason this is now the case is that in a multitude of situations, the financial planning aspect and the trust solution are inherently linked and most solicitors are not regulated to give financial advice. This means they are often having to advise on a trust without being able to deal with the finances. That’s not going to make for a good solution in lots of circumstances.

Trusts can be used by anyone and they should be explored in a range of situations, if you are looking to make gifts to children, handover property, are involved in a Company with a decent value attached, want to look at inter-generational legacy planning, have a life assurance policy, then at the very least you should be looking at a trust.