What are Asset Protection Trusts and why do I need to be wary of these?

Posted on By Lydia Brita
Image of legal advisor speaking to man and woman.

What is an Asset Protection Trust?

An Asset Protection Trust – sometimes also called a ‘Family Protection Trust’ or ‘Care Fees Trust’– is a trust where people transfer assets (usually their home) into the trust during their lifetime, to keep them outside means-tested assessments on their estate. This is particularly relevant for both local authority-funded care fees and private care fees.

Do Asset Protection Trusts help to avoid care fees?

The short answer is: no. The core issue with these trusts is the deliberate deprivation of assets. If a Local Authority decides that you have deliberately deprived yourself of an asset to avoid care fees, assets in the trust will still be considered for means testing for care fees. In some cases, you could also face large legal and/or court costs.

Ultimately, you may pay for an expensive trust and still be required to pay full care fees and even incur legal costs.

How can you manage care fees?

A Care Annuity, also known as Care Fee Annuity or Care Home Annuity might be a useful solution. An annuity is a kind of insurance policy where you pay a lump sum to get a lifetime income to pay for care. The lump sum will guarantee an income sufficient to cover your or a loved one’s care fees. Advice would need to be taken from a financial advisor about this as Care Fee Annuities are not something lawyers can arrange.

The other option is for couples to create trusts in your wills. This protects the first person to die’s assets from being redirected by the surviving spouse through a conscious decision (such as changing their will) or otherwise (such as care fees). The trust in a will can still be used to support the survivor by allowing them to live in any property owned by the first person to die, support them with their care, but they have no absolute right to the capital, which is held at the trustees’ discretion.

Can Asset Protection Trusts help to reduce inheritance tax?

Asset Protection Trusts can sometimes increase the amount of inheritance tax paid upon your death. This is because transfers to a trust over a certain amount will trigger an immediate inheritance tax charge.

Trusts are also subject to inheritance tax every ten years, as well as when assets leave the trust. Properly administrating trusts can also incur costs.

Asset Protection Trusts are also liable to capital gains tax and income tax in the same way as people are. We recommend that you get advice about whether the Asset Protection Trusts is liable to either or both of these taxes.

Can Asset Protection Trusts help avoid loved ones waiting for probate?

Asset Protection Trusts can potentially help mitigate the impact of loved ones waiting for probate upon your death. It removes the need for probate to sell your home, as the surviving trustees could sell it after your death.

However, probate may still be needed after your death to be able to deal with your other assets, such as bank accounts, that are not included in the trust. At present, probate is generally granted within six weeks of the application being submitted.

Are there any other risks to be aware of?

Bear in mind that once you transfer your home to a trust, you no longer own it. It is owned by the trustees and their permission is required should you want to sell the house. The proceeds would then belong to the trust and you would need the trustees’ permission and agreement to use the funds to buy a new house. Likewise, it can make it harder to obtain equity release if the house is owned by a trust, and the trustees’ agreement would be required.

Asset Protection Trusts are often mis-sold. People are told the trusts will reduce future care costs but, in reality, the costly arrangements are being put in place when it does not achieve what they want because of the deliberate deprivation rules (see above). The arrangements can put consumers in a vulnerable position, particularly when the companies mis-selling these arrangements appoint themselves as trustees. They, as trustees, then need to agree before anything can be done with the assets in the trust, which is usually your home.

In conclusion

You should always be wary of off-the-shelf estate planning solutions that promise more than they can deliver.

Although Asset Protection Trusts may be marketed as a smart way to avoid care costs, the legal reality is very different. They are expensive arrangements, which Local Authorities are well within their rights to challenge.

If you are considering setting up a trust for any reason, it is essential to speak to a qualified and specialist estate planning professional who can help you plan for the future.

If you have already set up one of these trusts, you can also review it with an estate planning professional to ensure it suits your needs.

Speak to a TEP, estate planning professionals who have the expertise to help you plan for the future.

Amy Lane TEP, Partner, Gunnercooke

Removing Trustees: a short guide

Posted on By Liz Skinner
worry,tax,concern

Trusts are created for different reasons and in many different ways. Trusts are also often used to provide for disabled people in estate planning and in will writing.

However, sometimes it is necessary to remove a trustee for the trust. This can be an individual or a Trust Corporation. A trustee may be lay, which means non-professional, or professional. If they are professional, they are likely to charge for carrying out their role. They can make decisions about the assets in the trust. Unless they are also the beneficiary of the trust, they have no right to enjoy or benefit from the property or assets in the trust. This could be when:

  • A trustee acts improperly;
  • A trustee wants to stand down;
  • A trustee loses mental capacity to carry out the role, or
  • The beneficiaries would prefer someone else to carry out the role.

Check the deed

The first thing to do is always check the trust deed, which will usually set out how trustees can step down, who can appoint new trustees and how.

Trustee wants to step down

If a trustee wants to step down and is capable of doing so, it is almost always necessary for a Deed of Retirement and Appointment to be executed. The trustee should follow the process as set out in the trust deed.

Trustee doesn’t want to stand down

When a trust deed allows trustees or other people to appoint trustees, they can simply remove a trustee in writing and appoint a new trustee in their place.[1] If it doesn’t, they can direct a trustee to do this in writing if:

  • all beneficiaries have mental capacity to make the decision to remove a trustee and wish to do so, and
  • are over 18[2].

The trustee must then follow this instruction.

If the above does not apply, then the court can remove a trustee where it is expedient to do so[3], such as when a trustee is insolvent or otherwise unfit to act. It can also remove a trustee to protect the interests of the beneficiaries or trust assets, for example if a trustee has been dishonest or made bankrupt.

Trustee loses mental capacity to act

A trustee without capacity to carry out the role is not automatically removed or replaced, and an attorney can only act in their place in limited circumstances.

The first question to ask is whether the trustee has a beneficial interest in the trust. A professional trustee is unlikely to have a beneficial interest. If they don’t have a beneficial interest, then another trustee can simply appoint a new trustee to act in their place in writing[4].  

If there aren’t any other trustees, and all of the beneficiary have mental capacity to do so and are 18 or older, they can appoint a new trustee[5].

However, if the beneficiaries aren’t able to do this, then they will need to make a court application[6] to facilitate the removal of the trustee and appoint a new one. The type of application will depend on the circumstances of the case.

If the trustee does have a beneficial interest in the trust, for example in a family trust or in the case of the ownership of property where the people that legally own the property also live in or receive rent or other benefit from the property, the situation can be simpler.

If the incapable trustee has a lasting power of attorney (LPA) for property and financial affairs or enduring power of attorney (EPA), and the property is being sold or let, the attorney can step into the role of trustee for that transaction[7]. They can appoint a second trustee if needed. If there is no attorney, then an application must be made to court[8]. Again, which court they apply to depends on the circumstances.

Holly Mieville-Hawkins TEP, Senior Associate Solicitor and Head of Mental Capacity at Michelmores

[1] s.36(1) Trustee Act 1925

[2] s.19 Trusts of Land and Appointment of Trustees Act

[3] s.41 Trustee Act 1925

[4] s.36(1) Trustee Act 1925

[5] s.20 Trusts of Land and Appointment of Trustees Act

[6] s.41 Trustee Act 1925 or s.18(j) Mental Capacity Act 2005

[7] s.1 Trustee Delegation Act 1999

[8] s.36(9) Trustee Act 1925 or s.54 Trustee Act 1925

What is a trust, and why do I need to register it in the UK?

Posted on By Louise Polcaro
A child on his grandfather's shoulders with daughter looking on

A trust is a way for someone who owns assets, such as money, a house or shares, to transfer them to someone else. Although it is currently difficult to accurately estimate how many trusts there are in the UK, families have been using them for centuries to plan how they transfer money to future generations.

Trusts are not only for the very wealthy: they are also a useful tool for ordinary families. For example, a trust can prevent a disabled adult who is on benefits from losing their benefits if they inherited their parents’ estate. Even a relatively modest amount of money would be enough to cause difficulties for someone in this situation. A trust can give everyone involved peace of mind that no such difficulties will arise.

There are three main roles in a trust, which are the:

  1. ‘Settlor’: the person who puts the assets in a trust.
  2. ‘Trustee’: the person or people who manage the trust. For most trusts, having two to three trustees works best.
  3. ‘Beneficiary’: the person who benefits from the trust. In the example above, it would be the disabled adult on benefits.

There are several different kinds of trusts. You can find out more about them in this briefing.

Why you may need to register your trust

The EU has passed legislation in recent years to tackle money laundering, which covers how trusts are run. In response, the UK government has brought in new legislation that requires people to register trusts.

How it works

HM Revenue and Customs (HMRC) set up the Trust Registration Service (TRS) in 2017. Although there are some exceptions, most trusts will need to be registered with the TRS by 1 September 2022. The exceptions include:

  • Registered charitable trusts,
  • Certain types of life insurance trusts that pay out only on death, serious illness or disablement, and
  • Bank accounts held on behalf of minors or adults who have lost capacity.

You must register if the trust becomes, or is liable for any of the following taxes:

  • Capital Gains Tax
  • Income Tax
  • Inheritance Tax
  • Stamp Duty Land Tax
  • Stamp Duty Reserve Tax
  • Land and Buildings Transaction Tax (in Scotland)
  • Land Transaction Tax (in Wales)

The following types of trusts must register even if they have no tax liability:

  • all UK express trusts — unless they are specifically excluded (see here for those that are excluded)
  • non-UK express trusts, like trusts that acquire land or property in the UK or have at least one trustee resident in the UK and enter into a ‘business relationship’ within the UK.

Trustees have up to 90 days to let the TRS know of any changes to the information it holds on the register. The law was changed in February 2022 to give people experiencing a bereavement more time to notify the TRS of any changes.

How to register a trust

This briefing gives a brief overview of the registration process. The HMRC website gives full details and all the information that a ‘lead trustee’ will need to provide, including a Government Gateway User ID.

Find out more about registering trusts here

If you are not sure whether you need to register, talk to a qualified professional advisor about what you need to do to ensure you remain fully compliant.

Can I use a trust to avoid care fees?

Posted on By Louise Polcaro
care fees trusts

The cost of care can be extremely daunting and you may be concerned about the impact this could have on your finances and your family’s inheritance.

It’s important to understand that there are many legitimate reasons to set up a trust. For example, a life interest trust in a will is a very common and well-recognised arrangement. This allows a surviving spouse or partner to remain living in the family home during their lifetime, while ensuring the property eventually passes to the children. These types of trusts are widely used.

This article focuses on a very different type of arrangement, sometimes marketed as a way to ‘protect your assets from care fees’. These are often called ‘asset protection trusts’ or ‘care fees trusts’ and can carry serious risks.

Trusts marketed as a way to avoid care fees

Some providers will promise that by setting up a trust (often charging fees of many thousands of pounds) you can exclude assets from means-testing for care fees. While these schemes may sound convincing, you should be very wary of them.

What is ‘deprivation of assets’?

If your local authority suspects that you have transferred your home or savings into a trust specifically to avoid paying for care, they may decide that this amounts to deprivation of assets.

If deprivation is found, the local authority can:

  • Treat you as though you still own the asset;
  • Recover the value of the asset from the person who received it;
  • Initiate proceedings under the Insolvency Act 1986 to declare you bankrupt;
  • Apply for a judgment debt against you in a County Court.

In some cases, you could also face large legal and/or court costs, and potentially even criminal charges.

Note: This issue does not apply to will trusts (such as life interest trusts) which only take effect after death. It arises where assets are moved into trust during your lifetime primarily to avoid care costs.

‘But the salesman says if I set it up while I’m healthy, I’ll be safe…’

This is a common sales pitch. While it may be harder for a local authority to prove intent if you set up a trust when you were fit and healthy, there is always a risk they could challenge it.

If they decide against you, you could find yourself in a worse position: your care costs will still be assessed as if you owned the assets, but you will no longer have access to them to pay your fees. The local authority may also refuse to provide financial assistance.

Other things to watch out for

Be cautious if a provider insists on also acting as trustee. When you set up a trust, you give up ownership of the assets, so the choice of trustee is critical.

  • You do not have to appoint a professional trustee.
  • Many people appoint a trusted family member or friend.
  • For trusts that take effect in your lifetime, you can appoint yourself and your spouse/partner as trustees, but you must act in the best interests of the beneficiaries.

Whatever you do, make sure you are completely comfortable with your choice of trustee. Read our article ‘What should I look for when choosing a trustee?’

Final thoughts

Trusts can be an extremely valuable part of estate planning. Life interest will trusts, discretionary trusts for vulnerable beneficiaries, or trusts to safeguard children’s inheritance are all entirely legitimate and widely used.

What you should be very cautious about are arrangements sold specifically as a way to ‘hide’ assets from care fees assessments. These ‘asset protection’ or ‘care fees’ trusts may be challenged as deprivation of assets and leave you financially worse off.

In addition, there may be tax or other consequences of putting your assets into trust.

As you can see, this is a complicated area of law and each person’s individual circumstances will vastly differ. If you are considering setting up a trust, you should speak to a qualified advisor to discuss your specific situation and find a solution that works for you.

Were you a client of Universal Wealth Preservation?

Posted on By Joanna Pegum
warning sign

STEP has received an unprecedented number of enquiries regarding Mr Steven Long and the companies of which he is a Director, namely Universal Tax Solutions of Dencora House, 34 White House Road, Ipswich, Suffolk, IP1 5LT, which traded as Universal Wealth Preservation. Associated companies include Universal Asset Protection Ltd and Universal Trustees Ltd.

Mr Steven Long, Mrs Melanie Long and Universal Trustees Ltd act as Professional Trustees. Universal assisted clients with drafting and managing trusts, wills and lasting powers of attorney (LPAs), as well as providing secure storage of original documents.

STEP suspended Mr Long’s membership on 1 November 2017, and he was permanently excluded on 5 October 2018, following the completion of the disciplinary investigation into a number of the complaints received.

Universal Asset Protection entered into compulsory liquidation in May 2018, with the business premises of Universal Wealth Preservation having closed several months previously. We do not know nor can we speculate why the business ceased trading.

Clients contacted STEP after they experienced great difficulties in contacting Universal, with no responses to emails, letters or phone calls.

We were advised by clients that they were concerned about the management of their trusts, with delays in estate administration and payments from the trusts being made, in addition to being unable to ascertain the whereabouts of their assets, or retrieve original wills and LPAs held in secure storage.

Universal clients now face the realistic prospect that they are unlikely to retrieve original documents or to recover cash assets.

Suffolk Constabulary investigated this and has seized all documents that were held at Dencora House.

We understand from media reports in December 2018 that Steven Long was sentenced to a prison term for contempt of court for refusing to disclose the whereabouts of client assets. This is a civil matter and is not related to the investigation by the Eastern Region Special Operations unit. We understand that criminal investigations are still underway.

In October 2023, we became aware of media reports that two men had been charged by the police in relation to the collapse of Universal Wealth Management.

We understand that Steven Long, 56, of Onehouse, Stowmarket, was charged with three counts of fraud by abuse of position, contrary to section 1-4 of the Fraud Act 2006 and Ray Simpson, 72, of Miranda Do Corvo, Portugal, was charged with one count of the same offence.

Steven Long appeared before Westminster Magistrates’ Court on 8 November 2023 where he was charged with three counts of fraud. He did not enter a plea for any of these charges and his case was transferred to the Crown Court. He was due to appear in Southwark Crown Court on 6 December 2023.

Ray Simpson was not able to attend Westminster Magistrate’s Court on November 8 on health grounds. His case was adjourned until 6 December 2023.

Steven Long pleaded guilty to two counts of fraud on 4 March 2026 and is due to be sentenced on 13 March 2026.

What should you do now?

STEP is advising Universal clients to:

  • Seek independent legal advice from an experienced trust and estate practitioner on your options, which may include how to make an application to the courts to replace Mr and Mrs Long/Universal Asset Protection Ltd as trustees, making new wills and LPAs
  • Check whether Lasting or Enduring Powers of Attorney have been registered with the Office of the Public Guardian – call the OPG on 0300 456 0300
  • If not in possession of an original will, make a new one without delay. In situations where someone has already passed away, we understand that Probate Registries are aware of the situation with Universal and registrars will accept a Rule 54 application for a copy of the will to be used. In circumstances where the Universal directors are appointed as executors, registrars will accept a Section 116 application to appoint new executors.
  • Contact the Land Registry to ascertain in whose name your property is registered. Call the Land Registry on 0300 006 0411. We understand that the Land Registry is aware of the issues with Universal.
  • If appropriate, consider whether to make a report to Action Fraud quoting ‘Operation Ardent’
  • Many clients will require Universal Trustees Ltd to sign forms that release them as trustees. In such circumstances, clients’ legal representatives (solicitors and barristers) only can submit a written request for up-to-date contact details to be released to them. Such requests should be made via ardentenquiries@ersou.pnn.police.uk.
  • If concerned by marketing information received or direct approaches from other firms advising you to use their services, consider taking advice from Trading Standards/Citizens Advice Bureau.

STEP has produced an article on what to look for when choosing a trustee.

You can find a full Q&A on Universal here.

If you have any queries, please contact standards@step.org.

What happens if there is a dispute over the wording in a will or trust?

Posted on By Joanna Pegum
argument

There is a long history of courts deciding disputes over words in wills and trusts, and  what the court looks for in every case is what the person who wrote the document actually meant by the words used. They will consider:

  • What normal and natural meaning do the words have in the context of the document?
  • Looking at the document, is there any indication as to what meaning the words were meant to have?
  • Is there any other evidence that throws light on the context of the words or the meaning intended (though not all such evidence can be used)?
  • Can the words be shown to be clearly contrary to what the person meant? If so, the document may be capable of being altered (rectified) to reflect what was intended.

The judge will consider the words and any relevant evidence and will come to a decision.

What role do I play?

If you are one of the executors, or one of the trustees, your concern may be only to ensure that you do the right thing and that the argument is resolved. If that is the case, then you should not take sides, but only take the necessary steps to ensure the argument is heard or resolved.

However, if you are pressing for one interpretation over another, then you will need to act positively to ensure your argument is heard. Do not rely on the executors or trustees to argue your case for you.

Will we have to go to court?

No. These days there are many ways of avoiding things going to court. Parties can enter into a mediation, at any stage, so that they can try and agree things between them. Or they can ask a skilled person, or even a judge, to give an early indication of the likely outcome, so they can then try and agree. This is known as an Early Neutral Evaluation.

It is possible that after an agreement is reached, a court may need to approve the decision taken, for example on behalf of children. However, that is a much easier process than arguing it all out before the court.

What about all the costs?

Sometimes it is considered that as the argument needed to be resolved, the costs can be paid from the estate or trust.

However, the modern tendency is to order the party who is perceived to have lost the argument to pay all the costs. That can be a very significant sum, so there’s a very good reason to try and resolve the argument early on.

Richard Dew TEP, Ten Old Square Chambers, Lincoln’s Inn, London.

What is a discretionary trust, and when would you use one?

Posted on By Joanna Pegum
woman looking thoughtful

A discretionary trust means trustees have the discretion to decide who benefits from the trust, from a list of potential beneficiaries.

They can also decide when payments are to be made, how much, and how often.

Discretionary trusts are very flexible and can have many uses. For example you might not know how much your beneficiaries might need in the future, so you can leave that responsibility to the trustees.

Personal injury trusts

Another good use for a discretionary trust is a personal injury trust, which can be set up by, or on behalf of, someone who has received compensation from a personal injury claim so that they don’t lose eligibility for their benefits.

Protecting other members of your family

Before 2007, when the law changed, it was common for spouses to make wills leaving the inheritance tax allowance (currently £325,000) to a nil-rate band discretionary trust, so the surviving spouse or civil partner could make use of their allowance after the first spouse died.

While this is no longer necessary, thanks to the transferable inheritance tax allowance between spouses or civil partners, it is useful to include such a trust in your will to provide for other members of the family. If there are assets which are likely to increase in value at a faster rate than the inheritance tax allowance, these could be included in the trust to mitigate inheritance tax on the estate of the surviving spouse/civil partner.

The main disadvantage of a discretionary trust is that any income which is produced from trust assets is taxed at a higher rate of income tax (currently 45%); however, beneficiaries who are basic rate tax payers can claim a tax rebate.

Taxes on trusts

If the value of the trust exceeds the inheritance tax allowance, there may be inheritance tax to pay when any assets are transferred to the beneficiaries (exit charge) and on each ten-year anniversary of the start of the trust (principal charge). The calculations for the exit charge and principal charge are complex, but the rate of tax is lower than the rate of inheritance tax and the maximum rate of tax payable is 6%. See Can I really use a trust to avoid inheritance tax? for more information.

Discretionary trusts are often set up by a will, but they can also be set up during someone’s lifetime. If the gift into trust is under £325,000 and no other gifts have been made, there will be no immediate lifetime inheritance tax charge.

It is worth noting that the inheritance tax residence nil-rate band, which came in to effect in April 2017, cannot be claimed if the deceased’s residence passes into a discretionary trust. This is because it must pass to direct descendants and cannot pass into trust (see What is the Residence Nil-Rate Band? for more information). However discretionary trusts are still useful tools to consider as part of estate and trust planning.

Tina Wong TEP is a Solicitor at Pothecary Witham Weld in London

How can I prepare for inheritance tax?

Posted on By admin
family

Inheritance tax is a 40% tax on your estate (your property, money and possessions), which is charged when you die. In most cases you only have to pay it if your estate is worth more than £325,000.

If your estate is likely to exceed this, there are some steps you can take to prepare for inheritance tax, and to ensure more of what you own goes to your loved ones.

Write a will

It’s well worth writing a will for a number of reasons. A professional advisor can make sure that your will takes into consideration any tax benefits that are available to you. If any benefits are overlooked, your executors can amend the will after your death, with a deed of variation.

Work out the value of your estate

You’ll need to work out how much your estate is worth to find out if you are going to be liable for inheritance tax. No tax is payable on the first £325,000, and this is known as the nil-rate band. But if you’re married, or in a civil partnership, you can pass your whole estate to your spouse or civil partner when you die, tax free. Your ‘nil-rate band’ then transfers to your spouse or civil partner, so when he or she dies, they will be able to pass on up to £650,000 tax free.

Inheritance tax benefits

Everybody gets an additional £175,000 free of inheritance tax to use against the value of their home, if it is left to children or grandchildren (2021-22 figures). As this allowance can be transferred to the second spouse/civil partner, a married couple could leave their family a combined estate of up to £1 million tax-free.

Both the nil-rate band and residence nil-rate band will be frozen until 5 April 2026.

Other tax benefits

There are other benefits you can use, mainly by reducing the value of your estate. There is an annual exemption of £3,000 that you can give away inheritance-tax free and you can give £250 to as many different people as you like. Donations to charities are tax free, as are wedding/civil partnership gifts from parents (up to £5,000) from grandparents (up to £2,500) and from anyone else (up to £1,000). You can make cash gifts larger than this, but you will need to survive seven years for them to be free from inheritance tax. the UK’s tax authority, HM Revenue and Customs (HMRC), provides a sliding scale so you can work out how much tax is payable if you survive less than seven years.

Use a trust

If you can estimate the amount of money that you will need to pay for inheritance tax, you can arrange to hold a lump sum on trust. You can contribute the nil-rate band of up to £325,000 tax-free into a trust every seven years, and it will not be included in your taxable estate.

Take out a life insurance policy

To minimise any impact on your loved ones, you can take out a life insurance policy to cover your inheritance tax bill, which will pay out on your death. As above, the policy would be held on trust so would not be taxable.

Use excess income

If you can spare some of your income without this affecting your quality of life, this is known as excess income. You are entitled to make gifts of money from your excess income to other people free of inheritance tax. However you must keep good records of your regular expenditure as well as the gifts made so that your executors can report them to HMRC and obtain the inheritance-tax exemption.

Give to charity

All gifts to charity are exempt from inheritance tax, but if you arrange to give 10% of your estate to charity (less the £325,000 nil-rate band) then you can pay 36% inheritance tax on your death instead of the usual 40%.

Get help

A qualified advisor will be able to assess your individual circumstances and advise on what you can do to prepare for inheritance tax.

10 tips to help you get started as a trustee

Posted on By admin

So, you’ve been made a trustee – what now? The key word is trust. You have been entrusted to look after assets on behalf of a beneficiary or number of beneficiaries.

With great power, however, comes great responsibility. As trustee you are accountable for keeping those assets safe, possibly investing those assets and making sure that they last for the lifetime of the trust or are used to benefit those listed in the trust deed.

The risks and responsibilities of being a trustee can be a daunting prospect, especially if you’re not familiar with the obligations of this role. It is worth having a conversation with an advisor who can help to point you in the right direction or assist with the day-to-day management of the trust.

Ten tips to get you started

1. Follow the terms of the trust deed

This may be in the form of a will trust (assets left on trust when somebody dies) or in the form of a settlement deed (a trust created during someone’s lifetime). This will advise you as trustee not only of who should benefit, but also of any powers or limitations – for instance, restrictions on investment of the trust funds. Trustees’ legal duties are laid out under the Trustee Act 2000 (England and Wales)/Trustee Act (Northern Ireland) 2001.

2. Check whether there is a letter of wishes

Although not legally binding, a letter of wishes often gives a personal insight into the reasons behind the trust and provides a greater perspective than the deed alone. It might be that one of the beneficiaries is particularly vulnerable and before distributions are made to them, extra care needs to be taken to ensure that it is used as intended.

3. Find out the tax treatment of the trust

Different trusts have different tax reporting obligations and are subject to different tax rates depending on the wording of the settlement and the underlying beneficial interests. It is worth obtaining advice in this regard, as it will be your duty to deal with the tax compliance issues – or the financial penalties for failing to do so. But panic not, if you do not feel that you can competently register the trust with His Majesty’s Revenue and Customs ‘HMRC,’ complete trust tax returns or keep up with the ongoing changes to tax regulations, then as trustee you can delegate this function to a suitable professional (whose charges would be a direct expense, who can charge their services directly to the trust).

4. Keep clear and detailed accounts

You should keep accounts to clearly record the split of assets and that the correct entitlements are paid from the right source. For instance, some beneficiaries are only entitled to the income of a trust, which would mean that they would receive the dividends and interest generated on stocks and shares but would not have any entitlement to the stocks and shares themselves, nor the sale proceeds of these. Preparing accounts can reduce the possibility of disgruntled beneficiaries later down the line. It can also provide a clear record to HMRC of those funds taxable to Income Tax or capital taxes such as Capital Gains Tax and Inheritance Tax.. Again a qualified advisor can help with this.

5. Consider whether investments should be actively managed

Delegate your investment management function to reduce risk and provide diversification where appropriate. Where a Discretionary Fund Manager is employed to help with the trust funds, an investment policy statement will need to be drafted to ensure that the investment manager is aware of any restrictions, the risk profile of the family and the need to balance the interests of the beneficiaries.

6. Make sure property is insured

Where there is a property, you will need to make sure that it is insured and that the insurers are noting the trustees’ interests. Arrange for periodic visits to ensure that the property is maintained and not becoming neglected or dilapidated. If there is a life tenant (a beneficiary entitled to stay at the property), see that they are upholding any duties imposed under the trust, which might include meeting the costs of repair and insurance.

7. Diarise important dates

For example, the specific dates when beneficiaries become entitled (known as vestings), i.e. upon attaining a certain age; ten-year anniversaries (for the purposes of periodic inheritance tax charges in particular trusts); and agreed distributions from the trust.

8. Hold regular meetings

In order to make informed decisions in the best interest of the beneficiaries, it is advisable to hold regular meetings with your co-trustee(s), advisor, investment manager, independent financial advisors and where appropriate, beneficiaries. You would be advised to minute your decisions in order to document that you have made the necessary considerations.

9. Be proactive

Don’t just sit on the money until the end of the trust’s life. Be proactive to find out what the needs of the family are, if any, and whether the trust can assist. Additional considerations may need to be made where vulnerable beneficiaries are to receive funds. You may need to make enquiries about any benefits that they may receive (which can be disrupted if personal savings thresholds are exceeded).

10. Just ask!

Importantly, if you’re unsure or need assistance with the performance of your duties in your new role, just ask!

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Cheryl Farnham TEP is a Director of Trust Group in Somerset, UK