Have you instructed a firm of solicitors to create a trust, or have you been appointed as a trustee of a trust many years ago? Do you know what that means for you now?
If not, it may be time to review what was put in place at the time and whether it is still up to scratch.
Trusts are a time-tested way of managing your wealth effectively. However, they may run for many years. And, like many areas of law, trust law has a habit of continuously evolving- so that doesn’t necessarily mean they can be left “on the shelf”.
Indeed, there have been myriads of changes to the taxation of trusts over the last 20 years. But if you haven’t been regularly reviewing matters things may have changed.
Even in the last 12 months we have seen lots of law firm changes. So if you do not know what the current position is then you may not be sure who to ask or what this means for you; for example, you may be unsure which firm holds the trust papers, trust accounts and other papers such as title deeds. We can help you work it out.
What is a trust?
A trust is a legal arrangement, whereby assets are transferred to trustees for the benefit of one or more beneficiaries. A trust deed will normally set out the trust purposes, conditions and powers of the trustees.
Trusts come in many different shapes and sizes and the terminology can often be pretty mystifying. You may have heard about family or asset protection trusts, discretionary trusts, bare trusts, charitable trusts, or liferent trusts – to name a few.
Are you a Trustee?
You may have been appointed as a trustee of a trust some time ago, but have not really had the opportunity to be involved since. As a trustee, you have a general duty of care towards the beneficiaries of the trust and it is important that you participate in the administration of the trust.
Generally speaking, a trustee would be expected to review the trust assets every year. You would expect a meeting of the trustees to be held, during which the trustees would review trust accounts, agree distributions of income and capital to beneficiaries and consider the investment strategy and diversification of assets. Other responsibilities will include keeping the trust papers in a safe place, and agreeing distributions to beneficiaries.
The compliance burden has also increased in recent years. You may need to:
- update trust registrations on HMRC’s website;
- submit an inheritance tax return; or
- complete self-assessment tax returns (if income has been received or a chargeable gain has arisen).
Have you set up a Trust?
There are many reasons to set up a trust.
A popular and understandable reason to set up a trust is to try to protect the family home from care home fees. However, placing assets into a trust to avoid paying care home fees may be unsuccessful if it is considered a “deprivation of assets”.
Indeed, local authorities are becoming more aggressive and are challenging arrangements that have been put in place many years ago.
Referring to the “Asset Protection Trust”, STEP, the Society of Trusts and Estates Practitioners notes:
“Many qualified practitioners consider that such devices do not deliver what they promise, in that local authorities are entitled to disregard the trust when assessing the individual’s assets, under the deliberate deprivation of assets rules”
We have sadly seen trusts that have been established with the sole intention to protect the family home, and the trust purposes have unfortunately failed.
It is always worth digging out the deed of trust, trust accounts and tax returns, and reviewing the position in light of your own personal affairs.
If you would like assistance with reviewing your trust or your position as a trustee, please contact firstname.lastname@example.org to arrange a free consultation to discuss our services.
The information and opinions contained in this blog are for information only. They are not intended to constitute advice and should not be relied upon or considered as a replacement for advice. Before acting on any of the information contained in this blog, please seek specific advice from Gilson Gray.