As the secretary of B P Collins Trust Corporation Limited, Dominic is an expert in the creation and administration of many trusts. He is also a full member of the Society of Trust and Estate Practitioners (STEP).
Do people create trusts to tackle the issue of inheritance tax (IHT)?
This is one of the key reasons why people create trusts. They can be a useful tool to help people reduce their IHT liability, while still retaining some control over the assets gifted.
For 2021 / 2022, the current IHT threshold, known as the nil rate band, is £325,000 and you pay no tax below this level. But there are a variety of other reasons why people choose to create a trust. For example:
- Care fees planning, if the nil rate band passes to a trust from which the surviving spouse can benefit, then neither the income nor the capital of the trust should be considered by the local authority.
- To provide protection against insolvency or divorce of intended beneficiaries
- If there is a chance that the surviving spouse will remarry, or you have children from a previous relationship
- To reduce the estate of the surviving spouse to below £2 million to qualify for the Residence Nil Rate Band
If you were to use one word to describe a trust- what would it be?
May I use three? Flexible and protects assets. For example, if someone wants to make sure their surviving spouse has a roof over their head but is keen to protect their capital in the event of a remarriage, a trust offers an ideal solution. It can also be very useful to set money aside in a trust for children until they are older and perhaps better able to deal with the assets responsibly.
By also looking at several generations of a family together, our solicitors can help you understand the best scenario for your particular circumstances and the relevant tax planning options. Our role can involve using trusts to structure clients’ business affairs and family investments, dealing with taxation issues arising on divorce and reducing taxes on death.
Can you ask anyone to administer a trust?
It’s important to choose someone that you can trust – for some people that’s a friend or family member. If they need extra guidance, B P Collins’ trust administration team can help the trustee navigate the increasing legislation that encompasses a trustee’s duties. However, an alternative is to choose B P Collins Trust Corporation as a professional trustee which will be completely impartial and is able to offer the expertise to ensure the correct administration of a family trust. It can offer efficient and expert handling of your trustee compliance obligations and assist with the day-to-day maintenance of your trust, including any key changes that affect the trust over time.
Are there any upcoming laws affecting trusts which I need to be aware of?
Recent legislation has introduced a requirement for most UK based trusts to register with the HMRC Trust Registration Service, whether they pay tax or not. There are some exceptions but broadly all existing UK express trusts (deliberately created trusts) need to be registered by October 2022. New trusts (unless exempt for some reason) must be registered within 90 days of being created or otherwise becoming registrable
Many trusts will already have been registered but some, especially those which have not had to submit tax returns may not have been. It is important that trustees are aware of this change and take steps to comply. We can of course assist with advice or deal with actual registration if required.