There are many different types of trust, but the main ones are:
Bare trust – this is a very simple trust whereby the trustee simply looks after the asset on behalf of the beneficiary. The asset will form part of the estate of the beneficiary and the beneficiary has the right to all of the income and capital (providing they are over the age of 18).
Interest in possession trust – with this type of trust, the beneficiary is entitled to the income arising from any asset e.g. bank interest, share dividends or rental income. For example, you might leave your spouse a life interest in the residue of your estate in your will – this means that they have a right to the income from the assets, but that they do not own the underlying asset themselves – instead this is left to another beneficiary.
Discretionary trust– with this type of trust you leave the distribution of the trust (income, capital or both) to the discretion of the trustees. Quite often the settlor of the trust will leave a memorandum of wishes to accompany the trust as to how they envisage the trust being distributed.
Personal injury trust – if you have been awarded compensation because of a personal injury then this type of trust can shield the compensation monies from means-testing for state benefit purposes in the future.
A trust for a vulnerable person – these types of trust qualify for special tax treatment if the beneficiary of the trust is vulnerable, i.e. a person who is under 18 years of age or a person with a disability and receives certain means-tested benefits.