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Frequently Asked Questions

What is the purpose of a Trust?

Trusts may be set up for a number of reasons, for example:

  • to control and protect personal or family wealth and assets when someone is too young or unable to handle their own affairs
  • to pass on money or property while you are still alive
  • to pass on money or assets when you die under the terms of your Will – known as a 'Will Trust

What is a Trust Settlor?

This is the person who created the trust and who owned the property being transferred. A trust can have more than one Settlor, however for inheritance tax purposes, each settlor is treated as making separate gifts under one trust deed.

Note :changes to law was introduced by the Goverment in 2015 in relation to ‘related ‘ trust.

What is a Trust Beneficiary?

The people selected to receive benefits from the trust. It is possible for a beneficiary to also be a Trustee. Trust interest can be fixed or beneficiaries can be as part of a class of beneficiary ( Children, grand Children ect.,). The type of beneficial interest an individual has, ranges from trust to trust.

What is a Trust Trustee?

The individual or individuals who take legal ownership of the property in the trust. They are responsible for the administration on behalf of and for the benefit of the beneficiaries .

Who should be a Trustee?

Usually Trustees are selected from close family and friends. They are usually those the settlor trusts most and whose judgement they can rely. Alternatively, people select professional Trustees.

If settling Assets in a Discretionary Trust, it is best to appoint a professional trustees as they will follow a Memorandum of wishes or follow ‘nominations’. Family members may have vested interests whereby their descretion is fettered.

Note you need a charging clause to allow professional trustees to assist in administration of a trust and to be paid fees.

Trustees are selected because the settlor/donor believes they will respect their wishes and distribute the trust fund to their beneficiaries in accordance with their wishes.

What Do The Trustees Do At The Commencement Of The Trust?

Firstly, trustees should make sure that they have the trust documents safe and familiarise themselves with the terms included. They should be aware of their powers and duties. Once comfortable with their responsibilities, they should sign the trust deed in the presence of an independent witness.

What Are The Main Duties Of A Trustee?

The duties and key responsibility of the trustee:

  1. Take legal ownership of the trust fund.
  2. They cannot personally profit from the role as a trustee unless they are a professional trustee where they can be paid for their time and the trust deed allows that.They may be entitled under certain circumstances to claim expenses.
  3. All trustees must agree when making decisions.
  4. The trustees must act according to the terms of the trust and not do anything outside the law of those terms.
  5. They must act in the best interest of the Beneficiaries and exercise a high degree of care and honesty. If they act dishonestly, they may be liable for any loss to the trust fund.
  6. They cannot delegate responsibility for the trustee, they can delegate duties and have a positive duty to use experts to assist and therefore they should appoint an investment specialist with balancing the trust and investments.
  7. They should conduct regular reviews of the trust fund .They need to keep clear an accurate records and accounts of all trust properties and ensure that all tax which the trust is liable for is paid.

What Are The Tax Responsibility Of A Trustee?

The trustees are responsible for reporting and paying tax on behalf of the trust.

Trustees Registering for Tax?

Trustees need to register a trust with HMRC to pay income tax and capital gains tax. Do this by 5th October of the tax year after the trust is set up ( or when it starts to take Income or chargeable gains, if this is later ). Trustees register by filling in 41G form and posting to HM Revenue and Customs, Trusts and Estates, Ferrers House, Castle Meadow Road, Nottingham, NG2 1BB

Sending Annual Tax Returns

Trustees must report the trust’s income and gains in a trust each year through the on line portal or by post. They will need to collect and keep records (bank statements) to complete the trust return.

Telling Beneficiaries About Tax And Income

Trustees need to supply the Beneficiaries with a breakdown of the trust and tax paid if they demand it .

Inheritance Tax

A trust may have an entry charge ( if a CT),a 10 year anniversary charge and exit charge. If the transfer of assets to a Discretionary Trust is above the NRB there is a 20% Inheritance tax charge, with the other 20% charged on death within 7 years, subject to taper relief. There are 10 yearly inheritance tax charges on Trust ( maximum 10%). There are exit charges depending upon the time the trust has been in existence.

What is a Deed of Trust/Declaration of Trust?

A Trust is a legal arrangement where one or more 'Trustees' are made legally responsible for holding assets. The assets - such as land, money, buildings, shares or even antiques - are placed in Trust for the benefit of one or more 'Beneficiaries'. A Deed of Trust is also known as a Declaration of Trust.

What is a Will?

A will is a legal document that determines what happens to the distribution of your property, assets and any minor children you may have in the event you should die. A will gives you the sole discretion over the outcome of your assets, belongings and who should inherit family heirlooms and increases the chances of your wishes being accepted. A will should be set out in writing, and signed by you and your witnesses. It is important to consult with a professional, such as Affinity Legacy to ensure your will meets the high standards required to ensure the instructions are carried out when the time comes.

Do I need a Will?

To ensure your last wishes are carried out, you should get a will that is written and overseen by a professional body, such as Affinity Legacy. There is no guarantee once you have passed away that your final wishes are carried out, any property, money or assets you own may not automatically get passed down to your children or loved ones, they could end up back with the government, leaving your loved ones with nothing. Putting a formal and legal will in place will give you the peace of mind that your family heirlooms and possessions are passed on to who you wish them to.

Deed Of Variation?

For additional tax planning and mitigation or to re-route legacies, there are post death variations available. If a Beneficiary does not want to keep his or her inheritance, they have three options. To give away which may have immediate tax consequences ( including Income tax,IHT, CGT),disclaim it which means it goes back into the Estate and is redistributed either as residue of the Estate or via intestacy or the better course of action would be to do formal variation of the Will. The Estate is charged IHT based on the new amended provision and Beneficiaries do not suffer adverse IHT.


In order to create a variation , there must be:

  1. A written document ( usually a Deed). This must be completed after 3 Months , but within 2 Years of the death.
  2. There should be an election made with reference to the various tax acts if required.

The main benefits of the Deed of Variation are

  1. You can redirect Assets from the Settlor’s Estate post death and the effect is as if the Testator had gifted the Legacy as part of his or her Will
  2. Helps to reduce tax liability of the Estate distribution
  3. Estate is charged IHT on the basis of amended provision and therefore no adverse effect