Legal News | 15.09.22
Truss on Trusts
Whatever your thoughts on the new government, it is fair to say the new Prime Minister has had a lot on her plate over the last couple of weeks.
With such a long list of issues to tackle, it is unlikely trusts will appear high on the PM’s agenda (and indeed trusts, historically, do not tend to be a priority for review). This said, we could not resist the urge to join the newspapers with our own Private Client spin on a ‘Truss’ and ‘Trust’ article…
Brief summary of Trusts
In simple terms, a trust exists where the legal owner(s) of an asset (the trustee(s)) differ from the individual(s) entitled to benefit from the asset (the beneficiary or beneficiaries).
This structure is established for various reasons, which may or may not include tax efficiency.
- Trusts come in a variety of forms, including:
Discretionary trusts, where trustees have discretion to distribute trust assets between a class of beneficiaries, as they see fit;
- Life interest trusts, where one party – the life tenant – receives income from the trust asset(s) for their lifetime, whilst another party or parties – the remaindermen beneficiaries – receive the capital on the death of the life tenant; and
- Bare trusts, where a trustee holds property for a beneficiary absolutely.
Other trusts include disabled person’s trusts, bereaved minor’s trusts and 18-25 trusts.
What changes could be made?
Changes to trusts rules are uncommon, although a significant change was introduced recently in relation to their registration with HMRC – see https://www.wansbroughs.com/news-events/trust-us-you-want-to-read-this/. What further changes might the future hold?
Income tax, capital gains tax and inheritance tax
Trusts have specific rates of tax and personal allowances, where applicable. These could be reviewed in the future.
HMRC’s Trust Registration Service (“TRS”)
As mentioned above, there has been a significant change when it comes to the registration of trusts; broadly, most trusts now require registration with TRS. This is an evolving area and could see further change.
The Presumption of Advancement
As trusts law does date back so many years, there are areas that have struggled to keep up with modern life. This presumption (interpreting gifts by men differently, in some cases, from those by women) has been due for statutory repeal since 2010. The courts however realise the inadequacies and so rebut the presumption where evidence permits. Let’s hope the secondary legislation to bring the position up to date is enacted.
Finally, some might wonder whether trusts will continue to exist into the future; it is true that trusts are not found worldwide and do not exist in some jurisdictions. This said, trusts are firmly entrenched in the law of England and Wales (guidelines on the creation of a trust were made clear in a case from 1840!*) and so we cannot see this changing!
If you have queries regarding trusts, please do not hesitate to get in touch with your usual contact at Wansbroughs or by contacting us at firstname.lastname@example.org.
*Knight v Knight (1840)