A trust deed is an agreement between you and one or both of your creditors that you will pay one of them regular sums of money in return for their releasing you from their debts. One form of this is known as a Protected Trust Deed, and the other is the Common Law Trust.
You must be the one responsible for the money being paid to the trustee. If you wish to be a creditor in this kind of arrangement, the money will go towards paying off the debts of all the people affected by your personal bankruptcy. Only after this is done can you claim to receive your money.
You and your trustee must have a written agreement, and this must be signed by everyone – you, your trustee and your creditors. It is likely that your trustee will need your signature as proof of the terms of the agreement.
Trustees generally receive monies from the amount of money paid in to them by the creditors, and they use the money to pay the money that the creditors need. The trustee will also have a duty to care for the insolvent person’s assets.
Unlike in a bankruptcy that makes one become a legal relation relevant to the person’s other creditors, a trust deed stays private. The only people who have access to the trust deed are the trustees. If you don’t stick to the agreement, there is no legal obligation with which you are affected.
A trust deed protects the individual’s assets from any claims of the creditors. It also protects the assets of the person who is being protected (the trustee) from claims of those who may be in favor of your creditor.
Something a friend told me who what a trust deed created for his bucket truck inspection company told me, “The most challenging part of a trust deed for most people is acquiring the right to share in the trust’s income. A trust deed generally allows you to stay in control of most of your assets, unlike in a bankruptcy those assets would be taken over by the official receiver or se lazately. However, a large part of the trust will be taken over by a court-appointed official called the Trustee.”
In turn, the Trustee has the responsibility of looking after your assets. If you move into long-term care and need help, you would be in a position to transfer some assets over. However, when you first make a trust deed there are a number of things that you will need to check.
In United Kingdom the act of setting up trust deeds that legally tie up your assets for a period of time is called a protected deed. This kind of trust is not legally binding, but is a cheaper form of testament that is easier to arrange. In order to set up this kind of trust, you will not be able to named as a beneficiary. Instead, your trustee will be responsible for distributing your assets where that person wishes.
Furthermore, a trust deed also covers more property than in a regular testament. This property gets precedence over everything, even if you die before the trust has run its course. Your estates have to be appraised and distributed according to the agreement of the trust deed. If for any reason you break the trust deed up, the trustee has the power to claim your assets.
It is a good idea to choose a solicitor to draft a trust deed. A trust deed is not necessarily binding, but covers much more property than in a regular testament, and is easier to manage and administer.