THE ORIGINS of family trust and estates law dates back to the Middle Ages, when 12th century Crusaders would convey ownership of land to trusted family or friends in their absence. It is a method of estate planning and asset protection which has stood the test of time.

But have trusts now had their day? Figures released by HMRC in September suggested that their popularity is in decline, with numbers dropping by six per cent from 159,000 to 149,000 in 2017/18. Just 12 years ago there were around 220,500 trusts in the UK.

As a legal entity that holds property or assets on behalf of another person or group, trusts are an estate planning tool that can include money, property or other assets. Until the time comes to pass these on to the trusts’ chosen recipients, funds are managed by designated trustees.

But while the objectives of estate planning have been consistent through history, the ways in which families pass down wealth have evolved significantly since the time of the Crusades. It is likely that there are two major factors that account for the fall in the number of trusts and estates.

The first is a change to inheritance tax by way of the introduction of a main residence nil-rate band, which will give couples an additional allowance of up to £350,000 after it is fully introduced in the 2020/21 financial year.

When that allowance is combined with the existing nil-rate band, couples could see up to £1 million of their estate become not subject to inheritance tax. This has given people who could normally use trusts an additional means of offsetting inheritance tax through the value of their home.

Another major factor is amendments to pension rules that have changed the way people treat their pensions as an asset. In 2015 the rules changed to allow pension assets to be passed on after death, before the age of 75, to a wider group of beneficiaries free of tax. For those individuals who are fortunate enough to have other savings or investments that they can draw an income from, it allows them the option of seeing the pension fund as a family trust rather than as a source of income in retirement.

Unless pension rules change again in the near future, it’s likely that people will keep using this as a means of financial planning by maximising both annual and lifetime allowances on their savings pot. It is trends like this that will continue to impact the number of new trusts being set up, with people steering clear of a vehicle that by its nature can be complex and expensive.

However, for some families, trusts can still be worthwhile - especially for those who want to retain an element of control.

With trustees able to set parameters and conditions on how and when beneficiaries can access the funds, a trust can offer a level of protection and security, especially in the case of any youngsters who might be inclined to spend their full inheritance in one fell swoop.

For families who do decide to take the route of establishing a trust, it is usually a case of the more the merrier. We would recommend that the whole family is involved in discussions from the outset.

This not only helps to set expectations and outline parameters, but with all family members involved as trustees, you are better placed to deal with any issues and avoid unwelcome surprises about where the funds end up.

While a larger pool of trustees can mitigate some of the risks, it can also hinder decision-making and slow it down.

That can be a necessary evil with trusts and it is for this reason that we have noticed more older family members choosing to gift assets to their children or grandchildren, as each financial year people are entitled to an annual exemption of up to £3,000 worth of gifts, which is not included in the value of an estate.

Keeping cash in more accessible arrangements can be beneficial for gifting to young people, who may need the money for house deposits or similar purchases.

Through all of this, the decline in trusts’ popularity will likely continue, but they also remain an important way of passing down wealth for thousands of families.

Alan Harvey is a financial planner at Brewin Dolphin Glasgow.