QROPS are a simple matter of trust but word “Trust” makes them sound quite complicated. This is not the case at all – in the main the structures are quite simple.
Far from being for the preserve of the super rich, trusts provide a highly flexible, and advantageous, way of arranging financial affairs for many people that would not consider themselves wealthy at all. The protection of wealth, however large that wealth might be, for future generations is something that most parents and grandparents would want for their families.
What is a QROPS trust?
Who owns what and who is responsible for the running of a QROPS trust? All can be explained in a trust definition.
While the wordings of these trust documents might seem complex and full of legal jargon, the principle behind them is quite simple.
Let’s look at one legal definition of a trust:?
“A trust is a legal relationship whereby one individual (the “settlor”) transfers his or her assets (the “trust fund”) to another individual or company (the “trustee”) who holds and manages these assets for the benefit of others (the “beneficiaries”) named by the settlor. The trustees are bound by the terms of the trust deed.”
Simplified version of a definition of a trust- used for a QROPS
If we were to say that pension investors, it may require some clarification.However, if I use a situation that everyone can relate to, it might help explain the above definition. So, let’s go Christmas shopping-
You (The Settlor) want someone to buy Christmas presents for the children on your behalf. You write a Christmas shopping list (The Trust Document) and you ask your best friend (Trustee) to use 100 Euros (Trust Fund) to buy presents for the children (The Beneficiaries). Your friend (Trustee) being a responsible person completes the shopping by sticking to the list. Your friend (Trustee) is the legal owner of the 100 Euros but cannot have access to that money. Your friend (Trustee) is responsible for the 100 Euros or the presents until they are handed over (Distributed) to the children (Beneficiaries).
That is basically how a trust works and the QROPS trust is no different. Choose your friends (Trustees) wisely, don’t allow your friend (Trustee) to buy sub-standard presents (Unregulated Investments) or the children (Beneficiaries) will have their Christmas (Your Retirement) ruined.
The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.
This article was published on 22nd February 2017
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