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Setting up a Trust
A trust can be used for a number of different purposes. Sometimes they are used to manage the use of an asset such as a family home whilst passing the asset itself to future generations. They can also be used to protect assets for individuals who are unable to manage their assets themselves for some reason. They can also be used to ensure that part of your estate, often business interests, is passed to your beneficiaries without becoming liable for inheritance tax.
Families may also put assets in trust to allow the beneficiary to have limited entitlement which can assist with future considerations such as divorce, care fees and incapacity.
Who Can be a Trustee?
Anyone aged 18 years or older can be a trustee however, you should choose your trustees wisely as they will be taking on a big responsibility and have a legal obligation to carry this out properly.
It is a legal requirement that you have at least two trustees who will ensure that decisions are fair however, you cannot have more than four trustees. This is because many trusts involve property and it is not possible in England to have more than four owners of a property. You will also need to ensure that your trustees can get along with each other. It is possible to have majority decisions drawn into trusts, but decisions made unanimously are best.
You may also want to consider appointing a professional amongst your trustees. Our lawyers often take on the role of trustee for clients and are able to bring their experience of managing trusts to assist in decisions which need to be taken. It is also often easier for a lawyer to take the emotion out of a decision and to illustrate the benefits of a decision in an impartial way, whilst always acting in the best interests of the beneficiary.
How is a Trust Administered?
Under English law, a trust can be created to last for up to 125 years. There are strict rules to follow to maintain transparency and to always keep the interest of the beneficiaries front of mind when making decisions. Most trusts must be registered with HMRC and may be subject to taxation or charges, depending on how they are set up and who the beneficiaries are.
All decisions must be recorded and regular trustee meetings should be held. Accounts must also be produced regularly to illustrate how the trust is being managed.
For a long running trust, it may also be necessary for a change of trustee and this must be carried out in a specific way, with careful thought and consideration as to how the Trust will be run by the new combination of trustees.
Can a Trust be Cancelled or Dissolved?
A trust can be brought to an end often at the agreement of all the relevant parties, or often with the consent of the Court, so if you have concerns, please get in touch and we'll do all we can to steer you / the trustees through what the options are.
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