Trusts

There are several kinds of trust and they are  used in different circumstances. It’s important to make sure you get quality advice, that results in a Trust that meets your requirements.

What is a Trust?

A Trust is an obligation binding a person who holds the legal title (the Trustee) to deal with property for the benefit of another person (the Beneficiary). Some can be created by Will or by a Trust deed. Other Trusts are imposed by law and are not documented.

There are different types of Trusts, such as fixed, discretionary and lifetime Trusts which are used in different circumstances. Your solicitor will examine your circumstances, and find you the right Trust to match. This is a bespoke process, as tax rules and any potential changes to your personal situation must be considered.

The Powers of Trustees

Trustees have control over the Trust, and how it’s handled, but only as the law and the details of the Trust document allow. They can for example, open and operate bank accounts, invest money or insure property – as long as they’re acting for the Beneficiaries.

If a Trustee needs legal advice this will be funded by the Trust, unless they have done something wrong. This is called committing a ‘breach of trust’ and in these cases the Trustee must pay for the losses they’ve incurred. The Trust will also pay for professional services such as an accountant, as long as the cost is necessary to keep the Trust running smoothly.

How much does setting up a Trust cost?

This will be discussed once the type of Trust is known but will be based on the hourly rate of the Solicitor acting. Trusts that are created in a Will are included as part of the costs of making the Will.

What are the duties of the Trustees?

A Trustee must:

• disclose any circumstances where they may have a conflict of interest with a Beneficiary
• not act in conflict with the interests of the Beneficiaries
• ensure they know what the terms of the Trust are and that they are carried out
• ensure that they do not act beyond the terms of the Trust and its powers
• ensure that good Trust records and accounts are kept and pay tax due on time
• take independent financial advice. This does not preclude the use of common sense. The Trustees must also ensure that the advice taken is in accordance with the Trustee Act 2000. The ultimate decision over what to invest in is the Trustees’ decision. It cannot be delegated
• act impartially between multiple Beneficiaries and those who are Beneficiaries now and those who will be in the future. This is the general rule but in the case of a personal injury Trust the compensated Beneficiary will be expected to be the main Beneficiary for life
• take reasonable care. Professional Trustees must take more care than others
• act jointly. Trustees should not normally delegate functions to each other. Trustees are jointly liable for mistakes and should therefore act together
• not charge more than out-of-pocket expenses or profit from their role as Trustee, save in the case of professional Trustees appointed in their professional capacity
• ensure that the Beneficiaries are kept fully informed to avoid disputes

The team at TSP can make sure you get the advice you need to see that your Trust achieves as you intend.