Trusts, Trustees and Beneficiaries

Trusts, Trustees and Beneficiaries

Trusts are a complex area of the law and their origin can be traced back in England to the eleventh and twelve centuries when knights used trusts to transfer their land to a trusted third party whilst they were off fighting the Crusades.

Nowadays, trusts can be a versatile vehicle in asset protection, estate planning and financial management. If drawn up correctly, they can provide a structured and efficient way of passing assets to beneficiaries, simplifying the distribution of assets and reducing tax implications.

What is a Trust?

A trust is a legal entity that allows a nominated individual, a trustee, to hold and manage assets on behalf of another party, a beneficiary.  Trusts can arise from different life events such as someone not being able to manage their affairs due to incapacitation, the wish to pass on assets during a lifetime or passing on assets through a Will.

You have worked hard to acquire your assets during your lifetime and may wish to pass them on to family, friends or charity so they may also benefit, whether that be during your lifetime (a Life Trust) or after you have passed away (a Will Trust).

Looking after a Trust

The name given to a trust may not necessarily relate to the true nature or purpose of that trust as a trust can be created for a variety of purposes and has its own unique features.

It is therefore important to understand the different types of trusts, their terms and intended purpose, as set out in Trust Deed or Will. For example, who has the right to run it (trustees) and who is entitled to benefit (beneficiaries)?  Any associated documentation pertaining to the trust, such as a letter of wishes indicating how the trust is to be operated and named beneficiaries, also need to be taken into consideration.

Effectively running and managing a trust is key to ensuring the purpose of its existence is successful. Trustees play a pivotal role in this process, ensuring legal duties are complied with so the trust can be operated and managed effectively.

Trust and Tax

Depending on the assets held within the trust, it may be liable to income tax or capital gains tax. Tax returns may need to be filed with HM Revenue & Customs.

Trust Registration

There may be a requirement to register a trust with HMRC which, again, depends on the type of trust in operation.

Navigating Trusts

By understanding the intricacies of the trust, its terms and purpose, better equips trustees to make informed financial decisions to maximize the trust’s objectives and benefits.

It is therefore important trustees seek professional advice when embarking or taking on trust related matters, whether it be for asset protection, form part of estate planning or executing a Will.

Contact us

Rix & Kay’s specialist Private Client Team provide detailed Trusts support and advice to business owners, individuals and their families.

For more information please contact Bruce Clarke via e. BruceClarke@rixandkay.co.uk or t. 01732 440 853.