You will probably have heard of the term ‘trust’ but may not be too comfortable with your knowledge of the topic. A trust allows you to manage assets. Example reasons as to why trusts are set up are: an individual may not be able to handle their affairs due to being incapacitated, an individual may not be able to handle their affairs due to not being old enough, and (in England and Wales) if an individual was to die without a will, a trust is set up under inheritance rules. This article will provide a general overview of the very important topic of trusts, especially useful if you are new to it.
Example types of trusts are bare trusts, discretionary trusts and mixed trusts. Special tax treatment is given to some trusts for a disabled person or a child (‘trusts for vulnerable beneficiaries’). A vulnerable beneficiary can also be an individual who cannot manage their affairs due to a mental health condition. If the vulnerable beneficiary is a child who has lost their parent the trust will usually be set up by the parent’s will, or in the case there is no will, by special rules of inheritance.
The trustee has the responsibility on the trust’s behalf to report and pay tax. Other responsibilities for a trustee can depend on the trust type. The rate of income tax of a trust varies according to the trust type. A beneficiary may pay tax through Self Assessment or they may be entitled to a refund of tax.
The following are examples of records that you must keep about trusts for tax purposes: details of all taxes the trust has paid, details of all the expenses trustees have paid, and national savings bonds or certificates. The following are examples of authorities who are able to ask for information regarding beneficial owners of express trusts: HMRC, National Crime Agency and Serious Fraud Office. This page will go into detail about the keeping of records for trusts.
There may be more that you wish to understand regarding the topic of trusts; perhaps you may need legal advice. If you find you need advice on anything in relation to trusts, as well as the linked topic of wills solicitors may be able to assist you. It is of great importance to have the correct understanding of the topic to ensure all affairs are in order, and most importantly, legal responsibilities are carried out.