Setting Up Trusts, Assisting Trustees and Administering Trusts
MLP Law offer a full and comprehensive service to help you in establishing a trust, drafting trust documentation and provide advice on the ongoing trust administration, either acting as professional trustees or advising lay trustees. We can also advise as to the most suitable trust to establish in order to meet your needs, whether that be a discretionary trust, a life interest trust or other option.
If you are a trustee then you are responsible for looking after the Trust. Some Trusts have a professional trustee to carry out the administration whereas others only name non-professional trustees. If you fall into this latter group, chances are you will have acquired the services of a solicitor to help due to the demands of correctly administering a trust.
What are a Trustee’s Duties?
As a trustee you are responsible for managing the trust as well as being the legal owner of the assets. It is your responsibility to put the interests of the beneficiaries above your own at all times in the management of the trust. There are many duties and these can be daunting and overwhelming as well as taking considerable time, especially when you run into any complications.
In order to effectively manage the trust, you (or a solicitor appointed) will need to:
- administer the trust according to the trust deed
- invest and manage the assets – including the sale of any assets
- process payments or other distributions to the beneficiaries from the trust fund
- keep detailed records including regular accounting for trust assets and income
- manage tax affairs – including the preparation of annual trust accounts, filing tax returns and trustees’ tax deduction certificates (more info below)
- attend trustees’ meetings
- comply with various laws affecting trustees and management of trusts
Tax and Trusts
As a trustee, you are responsible for managing the tax affairs of the trust. This includes registering the trust, completing tax returns and paying both Income Tax and Capital Gains Tax as required, which can be a formidable task. Depending on the type of trust you may also have to make returns for Inheritance tax. For many trusts it is then also your responsibility to provide beneficiaries with a statement about the amount of income and tax paid by the trust. MLP Law can assist with these matters and refer to accountants and financial advisers as required.
Why should I use a solicitor to administer and manage a trust?
Trusts are important – they are often set-up to protect assets for future generations, creating a legacy for children or grandchildren. They can mitigate inheritance tax. There are different sorts of trusts and each type has its own tax rules and rules for how it should be managed and the beneficiaries provided for.
Solicitors are experienced with the nuances of Trusts and can take over the difficult administration aspects, allowing you to focus on the decisions that really matter. Your solicitor should also proactively provide you with information and strategies to ensure that assets are protected and the beneficiaries are best served. The needs of beneficiaries can change over time as their circumstances change – a good Trust solicitor will be able to ensure the Trust can adapt.
Trusts are often set-up with some degree of strategic tax planning in mind, with tax advantages and disadvantages being considered. This includes the mitigation of inheritance tax. Any tax strategy employed may need to be adapted overtime due to changes in legislation. There have been significant changes to the rules affecting the taxation of trusts in recent years which need to be taken into account.
Trust funds can be used to pay for solicitors and other advisors, so that trustees don’t have to pay for these services out of their own money.
How do I know my solicitor is doing a good job managing the trust?
In order to effectively manage a trust, many trustees use a solicitor. If you already have a solicitor managing your trust – this is often the solicitors who set-up the trust – then you need to know that they are still managing the trust effectively.
Your solicitor is responsible for ensuring that the wishes of the settlor are met and that the beneficiaries are being provided for in accordance with the terms of the trust. Like with most things, it’s all too easy to think ‘out of sight out of mind’ and not consider if the solicitor is doing a good job. This is especially the case if the solicitor’s administration/management fees are covered. However, when it comes to Trusts you need to be sure that the solicitor genuinely cares about making the Trust work for everyone and are proactive in the management of it. If you are the trustee’s then it is your legal duty to ensure the trust is being properly managed.
Trusts are flexible and can be often tailored to meet the changing needs of beneficiaries. This is where a proactive solicitor that has taken the time to get to know you personally will be able to offer solutions. For example, if the Trust was set up for teenagers that have since become adults with children of their own then their needs will have changed and this needs to be reflected.
MLP Law can act as professional trustees for your trust, or advise lay trustees as to any legal issues arising in respect of the trust.
At the heart of any Trust is the need to pass on the maximum benefits to the next generation. In order to do this, we feel that it is necessary to have a genuine relationship with the trustees to fully understand the beneficiaries’ personal circumstances. Our expert team of trust solicitors can advise and guide you through the setting up and administration of a trust to ensure all legal and taxation matters are fully compliant.
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