Wills and probate – Melanie Jacobs, Head of Trust and Tax Team at HK Law, emphasises the importance for lay Trustees to consult solicitors at key trust milestones. Expert guidance ensures compliance.
When should a lay Trustee consult a solicitor?
‘Trusts are typically used to preserve assets for loved ones in Private Client Estate Planning, and many Trusts are fairly inactive a lot of the time,’ says Melanie Jacobs, Head of the Trust and Tax Team with HK Law in Dorchester. ‘Often action is only required when the Trust is first set up, when assets are distributed, or when the Trust needs to be wound up. These events involve strict legal requirements, and you must fulfil your obligations as a Trustee, so obtaining advice from a solicitor at key times will help you to ensure full compliance with these duties.’
Requirements during the trust period
When a Trust is set up, or if changes are made to it during its term, you must register the Trust or update the Trust Registration. The Trust Registration Service is a legal requirement and it is the trustees’ duty to register the Trust, failing which you may have to pay a fine for which you would be personally liable. If you have been appointed as a Trustee for a new Trust, or if you are a Trustee of an existing Trust which has not yet been registered, you should contact a solicitor to help you navigate the Trust Registration Service.
If the Trust is subject to income or capital gains tax, you will need to submit an annual tax return to report the tax due to HM Revenue and Customs. Tax returns should be completed carefully, and you should seek advice as to any tax mitigation that might apply to the specific Trust for which you are acting as Trustee. It may be that the type of Trust or the assets held within it have special tax benefits, and you could find yourself personally liable to beneficiaries if tax is overpaid as a result of failing to obtain legal advice.
Inheritance Tax should also be considered when setting up a Trust, paying in further monies, or paying money out. Our solicitors can help to ensure that Inheritance Tax is fully considered and reported.
Whenever you make a decision as a Trustee, for example deciding to distribute assets, to add discretionary beneficiaries, or to change the Trustees, that decision must be recorded. This might take the format of straightforward Trustees’ Minutes, or it may require a formal legal document.
Once a decision has been reached, and recorded, the implementation of that decision will usually require a deed. A deed is a specific formal legal document, and it needs approval from and signature by all relevant parties. The Trustees will need to sign, and in certain circumstances so will beneficiaries and/or the person who originally set up the Trust, as well as any new parties who are being added. A solicitor can help to draft the deed and ensure that it is legally compliant.
Requirements when the Trust ends
When a trust ends, the Trust Registration Service needs to be notified and any final tax return submitted to HMRC. This will probably be the time when further Inheritance Tax is triggered, which again must be separately reported to HMRC.
Much like when a key decision is made during the trust period, a deed is required to formally wind up the Trust and bring it to an end, so it is advisable to consult a solicitor on this final step.
How can we help?
It is relatively straightforward to be a Trustee while the trust is simply accumulating income, but when action is required matters become far more complex. As a Trustee, you are obligated to adhere to certain rules and requirements, and your decisions should be recorded and actioned appropriately.
Our solicitors can help you to ensure compliance in your role, to accurately draft relevant documentation, and to liaise with relevant organisations. For further information, please contact Melanie Jacobs in the Trust and Tax Team on 01305 252558 or email firstname.lastname@example.org. HK Law has offices in Blandford, Crewkerne, Dorchester, Parkstone, Poole, Southbourne, Swanage and Wareham.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.