Managing a Trust
Trusts are agreements that transfer the ownership of a person’s assets to someone so that they can then be used to benefit another person or group of people. Although Trusts are based on this simple concept, they require some level of administration and management.
Quick Trust Glossary
- The ‘settlor’ – the person who puts assets into a trust
- The ‘trustee’ – the person who manages the trust
- The ‘beneficiary’ – the person who benefits from the trust
- The ‘trust deed’ – where the details of the arrangement are laid out
- The ‘trust fund’ – the assets placed in the trust
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.
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
- attend trustees’ meetings
- comply with various laws affecting trustees and management of trusts
As you can see, there are a number of tasks involved in managing a trust, many of which have their own complexities such as Tax.
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.
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.
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 trustees 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.
It is good for your own peace of mind to know that the solicitor managing the trust is doing so effectively. In some cases, you may find that the solicitor is falling short.
The following are some of the warning signs that indicate your solicitor may not be proactively managing the trust and getting the most out of it for all involved:
- Slow accounts at the end of year – as a trustee you need the end of year accounts in a reasonable period
- Slow to respond to enquiries – trustees and beneficiaries may have numerous questions and require information. Your solicitor should be quick to respond and provide all required information, taking time to confirm your understanding.
- Lack of Planning and Strategy in the trust – as a trustee you want to be aware of investment matching, proactive tax solutions and know that the needs of the family are being met.
- Slow to explain how any changes in Law and compliance changes are impacting the Trust and failing to then provide quick solutions
- No system for reviewing the trust – trustees can’t operate in a vacuum and your solicitor should be actively contacting you to ensure the Trust is still serving its purpose.
- Slow to respond to any challenges from beneficiaries or any deaths/retirements
- No Paperwork trail – the solicitor should have all account details, meeting notes, and correspondence filed away safely and readily accessible should you need it
Making the Switch
If you feel that your solicitor is not doing all they can to ensure the trust is performing well then you can switch. It’s important to remember that the solicitor managing the Trust doesn’t have to be the same solicitor as set it up.
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 Trust solicitor David Edwards will take the time to understand your needs as well as those of the beneficiaries and how these can change over time. We ask the right questions at the right time in a way that works for you.
We also have a series of tried and tested processes in place so that you know the Trust is in safe hands. If you have some investments with stockbrokers as part of the Trust, then we can manage this process too.
Proactive advice – we are quick to adapt to a change in family circumstances as well as changes in the tax system.
Personal service – we take the time to understand the needs and objectives of the settlor, the trustees and the beneficiaries and their interests as you present them.
- We enable you to exercise as much choice and control as you want over the Trust
- We provide a safe pair of hands – with years of experience, we know what we are doing
- We assist trustees in setting up Trust Accounts and Trust Tax Returns – ensuring that the trust is tax compliant in a range of different jurisdictions and circumstances
- We ensure that Trustees act only according to the terms of the deed
- We provide innovative and tailored solutions
- We handle disputes between beneficiaries and trustees
- We understand about tax and how to approach Trusts from a tax perspective offering strategic advice on the tax consequences of Trusts
- We deal with the appointment and retirement of Trustees for you
- We ensure the right investment advice is obtained
Burt Brill & Cardens are a firm that my family & I have used for all manner of family and business matters since 1974. They offer a thoroughly professional and efficient service and I would thoroughly recommend them.