Trusts are a flexible tool for the shrewd management of assets and can be structured to suit all pockets.

Traditionally, trusts have been used for legitimate, but not always legitimate, tax planning. However, they can be established for many reasons. Almost anyone can set up a private trust for use in their own lifetime or after death.

In simple terms, a trust is a way of ring-fencing your assets. With a trust,ownership of the asset rests with one person or persons, while control over the asset rests with someone else for a specific period.

But how does this relate to everyday life?

Well, for instance, if you have taken out life assurance to provide for your child in the event of your death, the money would need to be held on trust until the child was old enough to manage it.

If a couple have a less than amicable relationship and one parent wants to establish a trust for a child, it may be preferable for that parent to choose somebody other than the other parent as a trustee.

The person who sets up the trust is called the settlor, and the settlor gives the assets to a trustee or trustees for the benefit of another person called the beneficiary. The trustee manages and administers the property. A will is a form of trust, but a trust can be formed during the lifetime of the settlor, in which case it is called a living trust.

It is common for parents of children with special needs to set up trusts for their care in the future.

Using a vehicle like this, the donor can gather a number of different trustees around himself or herself, who will look after the assets and the beneficiary beyond the donor's death.

Owners of family businesses often make use of trusts for the protection of the business, in case the children are not ready or willing to take over. Most company pension plans have a death-in-service payout and that could be applied by way of trust.

Where someone has a second partner or spouse, they may want the children of the first marriage to be the ultimate beneficiaries of their estate. With trusts, the person has some say in where their assets go after their death.

In such a case, the person could make a trust arrangement so that the second spouse is paid an income from the estate for their lifetime and the children are the beneficiaries on his or her death.

These are just some examples of how trusts can be used to exercise some control and protect assets for future generations.

Just to confuse the original definition, it's also possible to set up a trust for your own benefit.

With one type of bare trust your assets are held in someone else's name but you retain legal ownership, and they must do what you say. This kind of trust has, on occasion, been used to defraud the Revenue Commissioners.

There are two basic types of private trusts - fixed and discretionary, according to Mr Stephen Hamilton of A&L Goodbody.

A fixed trust is set up for the benefit of named individuals, and the purpose and method of applying the monies is all clearly spelt out in the document, Mr Hamilton said.

A discretionary trust is totally flexible and the trustees decide when and how assets should be paid over to the beneficiary. It is recommend in most cases that there should be a mix of family and professionals among the trustees. Mr Hamilton said three was a good number for a trust with a beneficiary under 18. A professional, family member and close friend would be a suitable combination, he advises.

Charitable trusts can be established by an individual, group of individuals or a company. The object of the trust would be spelt out in the trust deed. Mr Paul Overy of fee-based financial advisers Financial Engineering Network has drawn attention to the use of the annual small gift tax allowance as one way of planning for the future.

Each year a parent is allowed to give £1,000 (€1,269) to each child, or £2,000 where both parents are alive. This gift is tax free and does not form part of the tax-free thresholds.

Any gift made in this way does not reduce the child's ability to inherit assets at some future date. Most children are too young to have any interest in financial planning, but by using a trust fund, parents can be smart for their children. Godparents, uncles and aunts or grandparents can also make provision for a child in this way. There is no limit to the number of people who can use this device for a particular child.

The settlors can also be the trustees and invest the money on behalf of the child. The funds can be used for education, travel or to help the child start a business when they are older.

"As the asset is transferred to the ownership of the child at the value today, any future value vests in the child and is neither subject to gift or inheritance tax," Mr Overy said.

At the age of majority the child becomes entitled to control the asset.

They can then demand that the trustees release the asset to them, but this can only happen if the child is aware of the existence of the trust.

So if the 18-year-old is raving the night away and not taking his career or education seriously enough, the trustees can wait until they deem it prudent to release the asset.

In Mr Overy's experience trusts are not vehicles for the rich and famous, but are something that all of us can use to proactively plan for our children.

Depending on the complexity of the trust, you can expect to pay somewhere between £500 and £1,200 plus VAT to establish an individual trust fund.