Trusts and estates

Although trusts are an important part of tax planning, they have many uses far beyond this. For example, they are often used to protect the interests of children, and indeed sometimes young adults from themselves.

We have many years’ experience preparing both accounts and tax returns for trusts and estates. Indeed, several of our partners are trustees of trusts set up by our clients and therefore well understand not just the practical requirements but also the personal aspects of acting as a trustee and the legal responsibilities that come with it.

Although it is not a legal requirement to prepare a set of accounts, they are often an invaluable aid to the trustees for managing the trust’s assets and protecting the interests of the beneficiaries. As a result, we recommend that annual accounts are prepared, especially for larger trusts.

Like individuals, trustees are required to submit a tax return annually to HM Revenue & Customs. This includes details of all income received and capital gains realised in the year and, in some circumstances, distributions to beneficiaries.

As part of the preparation of the trust’s tax return, we will also provide details of the income to be declared on the beneficiaries’ own tax returns. Where distributions are made at the trustees' discretion, we are also happy to liaise with the trustees and the beneficiaries themselves in order to ensure that tax repayments to the beneficiaries are maximised.

Following changes introduced in April 2006, the majority of trusts are now potentially subject to inheritance tax at the following times:

  • On setting up the trust.
  • When capital distributions are made.
  • At every tenth anniversary of its creation.

We seek to work proactively with trustees in order to minimise the charge arising on each of the above occasions. This may include bringing forward distributions or structuring the trust’s investments in order to obtain inheritance tax relief. We will of course also prepare any tax forms that are required.

Although successive governments have restricted the tax advantages of offshore trusts, they can still play a role in tax planning for a non-UK domiciled individual. At the same time, offshore trusts can play an important role in other jurisdictions, for example to avoid local forced-succession rules.

We have experience of setting up offshore trusts as well as liaising with the overseas trustees, providing UK tax advice. This is often in association with other member firms of our international association IEC in, for example, Jersey.

Taxs advice is particularly important as wide reaching anti-avoidance legislation applies to offshore trusts of which it is all too easy to fall foul. Fortunately, we have extensive experience of advising not only trustees but also UK resident beneficiaries of offshore trusts.

We can also help executors not only by preparing any inheritance tax returns required to obtain Probate, but also by preparing accounts and tax returns during the period of administration. We can also work with the estate’s solicitors to consider deeds of variation and other options that may be available to reduce the inheritance payable or to pass on wealth to a subsequent generation.

For more detail on how we would work to help you, contact Paul Ffitch and James Hearsey.

Here’s who will help you...
Paul Ffitch
Paul Ffitch
James Hearsey
James Hearsey
Contact Paul & James

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