New Regulations in Respect of Trust Registration
(UK – Important Information).

The current position is that a Trust must be registered with the HM Revenue and Customs (HMRC), through the Trust Registration Service (TRS) if it suffers a Tax consequence.

That is generally accepted to mean that if the trust receives income, that income is taxable, and a tax return should be made to HMRC, and registration should be made before the tax return.

The general accepted principal to date, is that if no income is being received in the trust, then this does not have to be registered with the Trust Registration Service.

New Proposal, New Law Effecting Trustees.

It is now proposed under the Fifth-Anti-Money laundering directive (5MLD) for any existing unregistered trust, must now be registered by the trustees, regardless of whether or not they have a tax consequence, or indeed any income.

Although the directive came into force in the UK on 10th January 2020, the element relating to trust registration has been cancelled until further notice.

We will continue to monitor this procedure and advise through our website articles, but it is only a matter of time when all trustees will need to register their trusts that they are operating.

Trust Services

What does a trustee involve?

Because Trust funds do not belong to the Trustees personally, as they are holding the funds for the beneficiaries the law places heavy duties and a high standard of care upon Trustees.

In many ways the duties on Trustees are onerous and a lay person should give careful consideration to accepting an appointment as a Trustee. Unless they are a professional trustee they will not usually be able to charge for their time.

The principal duties of a Trustee are as follows:

To take reasonable care in exercising their powers as a Trustee. The main duty is contained in Section 1 of the Trustee Act 2000.

To read and understand the trust instrument (i.e the settlement or Will setting up the trust).

To act fairly between beneficiaries e.g in the case of a life interest trust, the trustees should strike a fair balance between immediate income return for the life tenant and capital growth for the beneficiaries after the life tenant’s death.

In the case of a discretionary trust, the Trustees must fairly consider the interests of the beneficiaries and make a decision on reasoned grounds.

Trust Services

What is a Trust?

Trusts have been used by families for centuries to protect wealth.

A trust is a formal transfer of assets (whether they be property, shares or just cash) to a small group of people (usually two or three) known as Trustees’ with instructions that they hold the assets for the benefit of others.

If the trust is to be made in your lifetime to take immediate effect, then it is usually evidenced by what is known as a ‘Trust Deed’ and often referred to as a ‘settlement’. If it is to be created on or shortly after your death then the trust rules must be set out in your will.

Whether by lifetime settlement or by Will, the trust instrument will state who is responsible for looking after the gifted assets (the Trustees), who is to benefit (the Beneficiaries) and any conditions or rules that are Trustees or Beneficiaries must adhere to.

The separation of the legal ownership and the beneficial ownership (which were once inseparable) is the unique characteristic of the trust concept. The Trustees are the legal owners but the beneficial owners are the Beneficiaries.

How long a trust lasts is entirely as you think appropriate, but the trust period must be stated in the trust document. It might be for just a few years, perhaps during a person’s widowhood or until a child attains a certain age or marries. Trust can last much longer however – up to 125 years. It is usually advisable to give the Trustees the power to terminate the trust at their discretion.

If you are creating the settlement in your lifetime, you can appoint yourself and your spouse as Trustees if you wish, so that you remain in control of the assets and the decision making.

Trust Services

We arrange, set up and administer a range of trusts for estate, tax and asset planning. We understand the long term impact on people’s future and ensure our services take into account.

We bring to an end Trusts which are no longer required, and we are registered with the HM Revenue and Customs.

In certain circumstances the nature of the trust work will mean that we work with Trust Services Company who are regulated by HM Revenue & Customs as a “Trust or Company Service Provider” or and in addition to Solicitors, Barristers and Accountants and Tax Planners.

If you have any queries please free to contact us.