Our private client team have an in-depth understanding of the law relating to Trusts and strong commercial acumen. We will take the time to identify what success means to you and work with you and your family to achieve your goals. In addition, we will remain by your side throughout the duration of the Trust, advising the Trustees and Beneficiaries to ensure the Trust is operated correctly.
Experienced, smart, and practical estate planning advice will ensure your Trust is created and run according to your requirements. Our Private Client team provides specialist advice to clients locally across Wiltshire, Hampshire, and Dorset and throughout England and Wales – from our offices in Salisbury, Fordingbridge, Andover and Amesbury.
To speak to one of our specialist Trusts lawyers, please call FREEPHONE 0800 1404544 or one of our local office numbers [see below] for FREE initial phone advice and an instant no obligation quotation.
What is a Trust?
Trusts involve a person or a company (a Settlor) putting money or assets into a legal entity to be controlled by Trustees according to the directions of the Settlor for the benefit of specific individuals (called Beneficiaries). A trust is a legal body in its own right and can be created by a your Will or set up during your lifetime.
Our Solicitors will draft a Trust document and arrange for it to be signed. Before doing so, we will work to understand your situation and advise whether a Trust is the best solution for your circumstances; there are associated taxes and payments that may make it not right for your particular circumstances.
You can be confident we will advise you of any implications and discuss alternative options which may better serve your interests.
Why should I set up a Trust?
There are several reasons for creating this kind of arrangement, including:
· Wealth management and protection – when assets are put into Trusts, you no longer own them. Therefore, provided you set them up correctly, those assets will be protected from creditors. You can also use Trusts to protect property and/or assets from becoming part of the financial settlement upon divorce. However, using a Trust for this purpose requires expert legal advice because the Courts can claw-back assets from a Trust if the other spouse successfully argues assets were put into trust specifically to prevent them from becoming part of a financial settlement.
· Avoiding care home fees – because it is the Trustees who control the Trust capital, those funds are not considered when assessing the family member’s available assets.
· To provide for vulnerable family members – people often create Trusts to ensure family members with physical or mental disabilities are provided for in the future. Because a Trustee manages the property/assets, the Settlor can be confident the assets/income will be distributed in a way they believe protects the Beneficiary’s best interests. A trust can even be created to provide for your own needs in the event that you become incapable in some way.
Click here to read more about Wills and the learning disabled
· To pay for the education of future generations – Trusts can be established to direct income for private schooling and/or university fees of grandchildren or great-grandchildren.
· Tax planning – Trusts can be used as a vehicle to manage how much inheritance tax is paid on your Estate, maximising the amount of your hard earned cash available to your remaining family. Using a Trust for this purpose requires expert legal advice, which we will provide quickly and in a practical manner.
· To minimise probate fees
Who owns the property in a trust?
When property and assets are transferred into a Trust fund, they are no longer owned by the Settlor; instead, they are the property of the Trust which is managed by trustees for the benefit of the Beneficiaries.
So, for example, this allows you to leave monies to your children or grandchildren – but only when they are old enough to handle it sensibly.
What are the different types of Trusts?
Our team will take the time to listen to your needs and objectives and advise on a model that best fits. That might involve protecting a capital sum for distribution to your beneficiaries in the future – but it might also mean using all or part of the capital as an income to those beneficiaries. Trusts are complex instruments and care and experience are required to draft them properly.
There are a number of different types of vehicles which can be used to achieve these ends and which include the following.:
· Bare Trust – also known as a Simple Trust, this enables the beneficiary to gain absolute rights to all the assets contained in the Trust and the income generated from those assets. They are often used to leave property to a beneficiary when they reach 18.
· Discretionary Trust – allows the Trustees to make decisions on how the capital/income is distributed to the Beneficiaries. A Discretionary Trust is often used where there is one Beneficiary who has more pressing financial needs than the others, perhaps due to a disability. These vehicles have the significant benefit of being very flexible in providing for a group of beneficiaries, especially where it’s not clear what kind of financial help will be needed in future.
Discretionary trusts are also particularly useful when the settlor has identified someone who is likely to be the main beneficiary, but is uncomfortable about putting the assets completely under the control of that person – perhaps if the beneficiary is bankrupt or in danger of becoming bankrupt, is going through divorce (and there is a wish to avoid the risk of assets passing to a former spouse) or the beneficiary is disabled in some way and will need assistance in looking after the money.
How much discretion trustees have to make payments depends on how the trust was drafted. The downside is that you lose control over the ultimate destination of the assets.
Among the powers trustees may be given under a discretionary trust are the ability to decide the following:
♦ the level of capital or income to pay to the beneficiary
♦ which beneficiary to pay
♦ how often such payments are to be made
· Inheritance in possession Trust – these are often known as “life interests trusts”. With these, the capital is held in Trust, and the income (less expenses) is passed to the Beneficiaries. Unlike a Bare Trust, the Beneficiary cannot normally access the capital. However, dependent on how the particular trust is drafted, trustees could have the authority to grant a capital sum to the beneficiary, even if in theory that beneficiaries is only entitled to income from the trust.
This is a useful vehicle for ensuring a spouse is supported with a regular and reliable stream of income following a Settlor’s death, whilst, at the same time, preserving the capital for future generations.
· Accumulation Trust – this allows the Trustees to accrue income and add it to the fund’s capital assets. These kind of vehicles are usually used to allow capital to be built up until the beneficiary is legally entitled to the assets of the trust
· Mixed Trust – allows for different types of all the Trusts listed above, in accordance with the tax rules applicable to each.
· Settlor-interested Trust – allows the Settlor or their spouse or civil partner to benefit from the fund. This type of fund can be used to provide for the possibility of the Settlor being unable to work for a period of time.
The importance of choosing the right trust
With so many different types of trust available, it’s really important to make sure that you create the right one for your own personal circumstances. So, for example, transferring your assets into certain types of trust means that they are no longer subject to Inheritance Tax on your death. In contrast, other types of trust may end up with a higher rate of income or capital gains tax.
Do I need a solicitor to create a Trust?
It is very difficult to set up Trusts without a Solicitor and any attempt to do so carries the risk of costly mistakes.
Many people come to us enquiring about putting their family home into Trust to avoid it being used for paying care home fees, unaware that the local authority can challenge a Trust if they believe it was set up for the purpose of avoiding paying for care.
In addition, you may have to pay a charge every ten years after the Trust was created, which might mean that the fund is not financially viable.
What kind of property can be placed into Trust?
Any types of assets can be put into your Trust – the most common of which are property and money.
Building a trust into a Will is something which our team do routinely. They allow you to clearly set out clear your wishes with regard to your property and the property you leave this is handled. While will trusts have some tax benefits, they are most commonly used to provide ongoing financial support for children and grandchildren.
To achieve this, part of your estate can be invested to provide good returns. Your beneficiaries’ ongoing needs can be regularly assessed to ensure a proper balance of immediate financial support and retaining of capital to provide for future support
Of course, we make sure that all of the legal and tax matters are dealt with as annual returns and accounts are required in law.
Trusts – protecting the vulnerable
Having money can be a blessing and a burden. Particularly to those who do not handle money well. And there are always those out there who are looking to take advantage.
So, one practical solution to this is to protect your vulnerable loved one is by putting their inheritance into a trust which will be managed by solicitors backed with years of technical knowledge and experience in looking after the needs of vulnerable clients.
What is a Personal Injury Trust?
Personal Injury Trusts can be set up to hold the amount of money received from a personal injury compensation payment. Capital held in this way is disregarded for means testing purposes. It allows the recipient of the compensation to have the compensation money without having to lose their entitlement to other government benefits such as:
· Housing Benefit
· Council Tax Benefit
· Disabled Person’s Tax Credit
· Jobseeker’s Allowance
· Income Support
· Employment and Support Allowance
These benefits are means-tested; therefore, if you have a certain amount of money in your bank account, your entitlement could be reduced or even suspended. Setting up a Trust avoids this problem.
How many trustees do you need?
It is possible to have only one trustee and one beneficiary. However in this case, the sole beneficiary is not permitted to also be the sole trustee.
What Legal Duties Do Trustees Have?
You can choose whoever you wish to be your Trustees – perhaps your spouse or partner, or one or more of your children. However it is vital to select the right Trustees.
In administering the fund, each Trustee owes a duty of integrity, good faith, honesty, and loyalty to the Beneficiaries. There should be no conflict between the interests of the Trustees and those of the Beneficiaries.
A Trustee should also have a sound knowledge of not only the Trust property but also the circumstances of the Beneficiaries.
Trustees are charged with the following duties:
· Carry out the instructions of the Trust with care and skill.
· Act impartially regarding the Beneficiaries.
· Provide information and accounts when the Beneficiaries ask for them.
· Preserve the value of the fund’s capital.
· To act unanimously unless the Trust document states otherwise.
Our Solicitors provide smart, practical, expert advice to Trustees, skilfully assisting them with any problems and tackling disputes before they get out of hand.
In addition, Bonallack & Bishop are regularly appointed as professional Trustees ourselves, in cases where the settlor doesn’t feel they have the right person to burden with long-term administration of the Trust.
Click here to read more about appointing Professional Trustee Solicitors.
Who can’t be a trustee?
There are a number of categories of people who simply are not allowed to be a trustee. The most important of these are as follows:
• anyone under the age of 18.
• undischarged bankrupts and those who have entered into an IVA or Individual Voluntary Arrangement
• those in prison or who may soon be convicted of dishonesty.
• those with a conflict of interest with the trust’s beneficiaries
It’s also worth taking particular care when it suggested that either a beneficiary or the set law should be one of the trustees. The best combination is often a balance of professional trustees and trusted family members.
What happens if a Trustee dies?
Why did that there were at least two trustees originally, a trust can continue to be administered by one surviving trustee. That’s why it’s always a good idea to have two trustees appointed.
In addition, if a trustee wants to retire from the trust, there is a provision for them to appoint a replacement. You will however need to make sure that the document states that a quotation of any such change of trustee is handled correctly. Our team can help you with that.
Do the trustees need to hold regular meetings?
That depends on whether the trust is active and, on any requirements built into the trust. If trust is dormant, then there’s no need to meet so often.
But as a general rule, annual meetings are often useful. These meetings do not have to be face-to-face – they can be held by phone or video call.
There is no formal requirement for minutes to be taken – but it’s always good practice to keep written records of any decisions made or information shared.
Among issues trustees would be sensible to consider on a regular basis are the following:
• any relevant changes in legislation or tax.
• the beneficiaries’ current and future needs
• how the assets themselves are being managed
• approval of trust accounts and signature of tax returns
What can we do if Trustees don’t perform their duties?
A Trustee has a legal duty to act in the best interests of the Trust and its beneficiaries (this is known as a fiduciary duty).
If a Trustee breaches their fiduciary duty, they may be liable for that breach. For example, a breach of trust may occur if a Trustee makes investments in a manner not permitted by Statute or personally benefits from the Trust (when the Trust document does not expressly state they may do so).
The Trustee Act 1925 provides several defences for breach of trust, including that the Trustee “acted honestly and reasonably and ought fairly be excused” for the breach.
A Trustee can be removed by exercising an express power set out in the Trust document, under powers conferred by section 36 of the Trustees Act 1925, or by the Court. If a Trustee loses mental capacity, a method for replacement is provided by section 20 of the Trusts of Land and Appointment of Trustees Act 1996.
Aren’t trusts expensive to set up and just for the wealthy?
Most people, when they think of trust funds, think of very wealthy people. This is a commonly held misbelief.
They can be used by a wide variety of people – and are certainly not restricted to the seriously rich. They can prove extremely useful in continuing to protect the ones you love the most, when you no longer can. And the tax savings they can produce often many, many times more than the original cost of setting up the trust in the first place.
Call our specialist team today – they can give you a quote for a bespoke trust that suits your particular circumstances. You will probably be surprised how inexpensive it is.
I hold property and shares in my personal name. How can I pass these on to their children and minimise inheritance tax?
If your children are under 18, then transferring the property to a trust for the benefit of the children is something you should consider.
If they are over 18, and depending on your circumstances, it may be best for some, if not all, of your property to be passed on by way of gifts – because after 7 years, those gift are no longer liable to inheritance tax. However there are limits on the property you can pass by way of gifts which after 7 years will not be liable to IHT. And remember that trusts and taxation are complex issues. So you should not take any action on this information alone – but speak to 1 of our specialist team will be able to advise you on your personal circumstances.
How our team can help you
Our Solicitors have years of experience assisting Settlors, Trustees, and Beneficiaries in all matters relating to Trusts – and in acting as Trustees ourselves.
Our team cut through the legal complexities and deliver straightforward, practical advice you can rely on. By instructing us, you can be confident the advice and representation you receive will swiftly resolve any problems you are having.
And if you want to set up a Trust to protect your wealth, we will listen to your ambitions and ensure the vehicle you create achieves those goals.
Our role as professional trustees
As professional trustees, here at Bonallack & Bishop we have particular experience in administration of trusts for beneficiaries with a range of vulnerabilities – including drug and alcohol addiction, mental health problems, brain injuries, – as well as for children under the age of 18 and surviving spouses living in the former matrimonial home for the rest of their own lives.
Of course, you may wish to appoint your own trustees and we have experience of working alongside and supporting these people, who are often older themselves.