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Trusts

This publication guides practitioners through establishing, amending, and ending a trust.

2 Matter Plans

Overview

The commentary covers the various types of trust structures, including vulnerable beneficiary and charitable trusts, beneficiaries’ rights and obligations, and individual and corporate trustees. It also provides further guidance on taxation requirements, including income, capital gains, and inheritance taxes, and deals with dispute resolution.

The Reference materials folder includes tables comparing business structures, and the comprehensive Getting the matter underway folder includes compliance and client care documents. Using the extensive Retainer Instructions when gathering information ensures nothing is missed.

Precedents in this publication include:

  • deeds of:
    • assignment;
    • novation;
    • variation;
    • appointment of part of the trust fund;
    • appointment of whole and termination of the trust fund;
  • a Discretionary Trust Deed;
  • a Bare Trust Deed;
  • a Vulnerable Beneficiary Trust Deed;
  • an Interest in Possession Trust Deed.
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2 Matter Plans Included

  • Item icon ALERTS - Nil
  • Item icon Full Commentary - Trusts
  • Folder icon Reference materials
    • Item icon Electronic Signing and Witnessing
    • Item icon 101 Succession Answers
    • Item icon Business Structures and the Comparative Table
      A comprehensive manual comparing various business structures.

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    • Item icon Looking to the Future
    • Item icon Further information
  • Item icon Overview
    Trustees hold the technical ownership in property for the beneficial owners. Trusts separate property ownership into legal or technical ownership, and beneficial ownership. The term technical ownership, rather than the more common legal ownership, recognises that a trust may be of an equitable ...

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  • Item icon Summary of the process
    The usual steps in acting on the creation of a trust are:

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  • Folder icon A. Getting the matter underway
    • Item icon File cover sheet - Trusts
    • Item icon To do list - Trusts
    • Item icon First steps
    • Item icon Retainer instructions - Trusts
    • Item icon Taking instructions in trusts matters
      Where a trust is to be created, practitioners will be instructed by an individual or company looking to settle the trust. The settlor can act as the trustee or appoint trustees to carry out their wishes embodied in the trust deed. Instructions are required on:

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    • Folder icon Compliance documents
      • Item icon Client Due Diligence and Anti-money Laundering Guidance
      • Item icon Client Details, Identity Verification and Source of Funds
      • Item icon Conflict of interest check
      • Item icon Client and matter risk assessment
      • Folder icon If required - Reporting an issue
        • Item icon Anti-money laundering internal disclosure
    • Item icon Initial letter to client enclosing Client Care and Terms of Business
    • Folder icon Enclosures for initial letter to client
      • Item icon Client care information
      • Item icon Terms of business
      • Item icon Scope of work - Trusts
      • Item icon A summary of the process of setting up a trust
    • Item icon Time and costs estimates
    • Folder icon If required - Letter to client varying the Client Care and Terms of Business
      • Item icon Letter to client varying the Client Care and Terms of Business
    • Folder icon General deeds, agreements, statements, declarations, consents, and execution clauses
      • Item icon Deeds and agreements
      • Folder icon Deeds
        • Item icon Deed for general use
        • Item icon Deed of assignment of agreement
        • Item icon Deed of assignment of agreement with consent
        • Item icon Deed of assignment of an insurance policy
        • Item icon Deed of assignment of equitable interest in residential land
        • Item icon Deed of gift
        • Item icon Deed of guarantee
        • Item icon Deed of release
        • Item icon Deed of release and grant
        • Item icon General deed of indemnity
        • Folder icon Library of standard clauses for deeds
          • Item icon Amendment
          • Item icon Confidentiality
          • Item icon Confidentiality - Extensive
          • Item icon Costs
          • Item icon Counterparts
          • Item icon Dispute resolution
          • Item icon Events beyond control
          • Item icon Governing law and jurisdiction
          • Item icon Interpretation
          • Item icon No assignment
          • Item icon Notices
          • Item icon Severance
          • Item icon Third parties
          • Item icon Waiver
          • Item icon Whole agreement
      • Folder icon Agreements
        • Item icon Agreement for general use
        • Item icon Boundary agreement
        • Item icon Confidentiality agreement
        • Item icon Construction agreement
        • Item icon Heads of agreement
        • Folder icon Library of standard clauses for agreements
          • Item icon Amendment
          • Item icon Confidentiality
          • Item icon Confidentiality - Extensive
          • Item icon Costs
          • Item icon Counterparts
          • Item icon Dispute resolution
          • Item icon Events beyond control
          • Item icon Governing law and jurisdiction
          • Item icon Interpretation
          • Item icon No assignment
          • Item icon Notices
          • Item icon Severance
          • Item icon Third parties
          • Item icon Waiver
          • Item icon Whole agreement
      • Folder icon Statements and declarations
        • Item icon Statement of truth
        • Item icon Statement of truth - High Court
        • Item icon Statutory declaration
        • Item icon Statutory declaration of solvency
        • Item icon Affidavit - General
        • Item icon Exhibit sheet for affidavits - General
        • Item icon Witness statement - Family matters
        • Item icon Exhibit sheet to witness statement - Family matters
        • Item icon Witness statement - Civil matters
        • Item icon Exhibit sheet to witness statement - Civil matters
      • Folder icon Execution clauses
        • Item icon Execution clauses - Agreements and contracts
        • Item icon Execution clauses - Deeds
        • Item icon Execution clauses - Overseas companies
      • Folder icon Consents
        • Folder icon If required - Personal data consent - General
          • Item icon Letter to client enclosing consent - General
          • Item icon Letter to third party enclosing consent - General
          • Item icon General letter enclosing client consent
          • Item icon General letter enclosing third party consent
          • Item icon Consent to provide information - General
          • Item icon Consent to provide information - General - Third party
        • Folder icon If required - Personal data consent - Health professional
          • Item icon Letter to client enclosing consent - Health professional
          • Item icon Letter to third party enclosing consent - Health professional
          • Item icon Letter to doctor enclosing client consent
          • Item icon Letter to doctor enclosing third party consent
          • Item icon Consent to provide information - Health professional
          • Item icon Consent to provide information - Health professional - Third party
        • Folder icon Change of name
          • Item icon Change of name deed for an adult - Concise
          • Item icon Change of name deed for a minor - Concise
          • Folder icon If required - Enrolment by an adult
            • Item icon Change of name deed for an adult - For enrolment
            • Item icon Statutory declaration - Enrolment of adult change of name deed
            • Item icon Notice for the London Gazette on the change of name of an adult
            • Item icon Consent to enrolment of change of name of an adult
          • Folder icon If required - Enrolment by a minor
            • Item icon Change of name deed for a minor - For enrolment
            • Item icon Statutory declaration - Enrolment of minor change of name deed
            • Item icon Affidavit of best interest for the change of name of a minor
            • Item icon Consent to enrolment of change of name of a minor
  • Folder icon B. Types of trust
    • Item icon Contingent and bare trusts
      The trustee of a contingent trust holds the trust property for a beneficiary for distribution when a specific event occurs. An example of a contingent trust is when the settlor leaves a specific asset in their will for a beneficiary when they reach the age of 30. If the beneficiary dies before ...

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    • Item icon Interest in possession trusts
      An interest in possession (IIP) trust is where the trustee passes the trust income to a nominated beneficiary, not the asset itself. An example of an IIP trust is a life interest in an asset granted by a will to a surviving spouse. The surviving spouse is entitled to all the income of the asset but ...

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    • Item icon Discretionary trusts
      Discretionary trusts are the most complex, requiring a wide range of clauses dealing with the powers and responsibilities of the settlor, trustee, protector, and beneficiaries. They give the trustee complete control over the trust assets, income, and discretion to distribute to any beneficiary. At ...

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    • Item icon Other trusts including charitable trusts
      Charitable trusts Charitable trusts are established for a particular charitable purpose rather than for the benefit of identifiable beneficiaries. They enable the transfer of gifts from individuals and corporations to charities, and can be established to provide services or distribute funds ...

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  • Folder icon C. Creating a trust
    • Item icon Creating a trust
      In all types of trust there will be a settlor, a trustee, and a beneficiary, or multiples of each. For a discretionary trust, a protector may also be appointed. The following steps are required to create a trust:

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    • Item icon Determining the type of trust
      The trust structure chosen will depend on the settlor’s reasons for its establishment and may include:

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    • Item icon The settlor
      The settlor is required to provide information about:

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    • Item icon Trustees
      Appointing trustees Trustees can be held to account if they fail to perform their obligations under the trust. Ensuring the trustees are competent and trustworthy to meet those obligations before their appointment avoids future disputes and difficulties.

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    • Item icon Beneficiaries
      Identifying beneficiaries The beneficiaries’ ages and their relationship to the settlor may impact the type of trust used and the drafting of the trust document.

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    • Item icon Protector – Discretionary trusts
      It is common though not essential for a discretionary trust deed to provide for a protector who has the power to oversee, remove, and appoint trustees. Due to the nature of their role, a protector is only relevant in discretionary trusts as they act to compel a trustee to carry out their role in a ...

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    • Item icon Identifying trust property
      Failure to identify the trust property clearly can cause confusion, leading to expensive and protracted litigation or the trust being ruled void. Information about the assets may include:

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    • Item icon Establishing the trust
      The trust is established when:

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    • Item icon Declaration of trust - Trust assets
    • Item icon Letter of wishes - Trust
    • Item icon Minutes of meeting of company accepting trusteeship
    • Item icon Trust deed review checklist
    • Folder icon Bare trusts
      • Item icon Bare trust deed - Multiple children beneficiaries
      • Item icon Bare trust deed - Single child beneficiary
    • Folder icon Interest in possession trusts
      • Item icon Interest in possession trust deed
    • Folder icon Discretionary trusts
      • Item icon Discretionary trust deed
    • Folder icon Trusts with vulnerable beneficiaries
      • Item icon Vulnerable beneficiary trust deed
    • Folder icon Charitable trusts
      • Item icon Charity Commission Model Trust Deed
      • Item icon Register with the Charity Commission for England and Wales
      • Item icon Application for income tax exemption status
    • Item icon Vesting the assets in the trustee
      Where the settlor wishes to be the trustee, the assets are not transferred to themselves. Instead, the settlor completes a declaration of trust stating that they hold the trust property for the benefit of the beneficiaries. As the property is not being transferred, confusion with any other assets ...

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    • Folder icon Library of asset transfer precedents
      • Item icon Receipt for trust asset
      • Item icon Transfer of whole of registered title(s)
      • Item icon Transfer of portfolio of titles (whole or part)
      • Item icon Assent of whole of registered title(s) by personal representative(s)
      • Item icon Deed of assignment of chattels to a trust
      • Item icon Stock transfer form
      • Item icon Deed of assignment of agreement
      • Item icon Letter to insurer giving notice of assignment of pension or insurance policy
      • Item icon Deed of novation of contract to a trust
      • Item icon Deed of assignment of choses in action
    • Item icon Letter to settlor with draft trust deed
    • Item icon Letter to trustee with draft trust deed
    • Item icon Enclosure - Trustee rights and duties
    • Item icon Managing a trust
      Once the trust has been settled, it needs to be managed by the trustees. If the trust deed permits, the trustees can appoint trust agents to manage the trust. Responsibility for ongoing administration can be assigned to ensure that records are kept up to date. Trustees may wish to hold regular ...

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    • Item icon Trustees’ duties and liabilities
      Duties Trustees have overriding duties in addition to their rights and liabilities. The scope will depend on the type of trust and the trust property. The duties are to:

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    • Item icon Deed of removal and appointment of trustee
    • Item icon Deed of nomination of new protector
    • Item icon Trusts and tax
      Tax implications play a significant part in deciding which trust to create, the entitlement of beneficiaries, and how and when to pay them the capital and income of the trust. The trust deed embodies the settlor’s wishes minimising tax liabilities and ensuring the trust is not a sham or void for ...

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    • Item icon Letter to client on registration of trust with HMRC
    • Item icon Registration
  • Folder icon D. Variation of a trust
    • Item icon Amending a discretionary trust
      Changing circumstances may require amendments to the discretionary trust, such as:

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    • Item icon Deed amending discretionary trust
    • Item icon Deed of ratification of trust
    • Item icon Deed of variation for vulnerable beneficiary trust
    • Item icon Court applications to vary a trust
      An application can be made to the court to approve a variation under s 57 of the Trustee Act 1925, s 64 of the Settled Land Act 1925, and the Variation of Trusts Act 1958. Section 57(1) of the Trustee Act 1925 gives the court broad powers to authorise dealings:

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    • Item icon Claim form (CPR Part 8) (CC)
    • Item icon Claim form (CPR Part 8)
    • Item icon Acknowledgment of service (Part 8 claim)
  • Folder icon E. Resettlement, disputes, vesting and termination
    • Item icon Resettlement of a discretionary trust
      If the amendments required to a discretionary trust are too onerous for it to continue, a resettlement may be necessary rather than an amendment. The resettlement could trigger a capital gains tax event and stamp duty or land tax duty liability on transfers of property or assets from the original ...

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    • Item icon Dispute resolution and discretionary trusts
      Discretionary trusts are favoured asset protection tools for many privately held family investments. They can become the subject of a wide array of disputes, particularly if there are complex financial arrangements with complicated family dynamics underlying the trust. Disputes that can arise from ...

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    • Item icon Vesting and termination of discretionary trusts
      Vesting Trusts are required to vest and end after the perpetuity period. The trust deed can provide for a vesting date or link the vesting of the trust to a specific event, such as a beneficiary reaching a certain age or the death of an identified family member.

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    • Item icon Deed of appointment of part of the trust fund
    • Item icon Deed of appointment of whole and termination of the trust fund
  • Folder icon F. Finalising the matter
    • Item icon Letter to settlor with final trust deed
    • Item icon Letter to trustee with final trust deed
    • Item icon Letter to accountant enclosing trust deed
    • Item icon Letter to client finalising the matter
    • Item icon Example invoice
    • Item icon Invoice recital - Trusts
    • Item icon Enclosure - Explaining the bill
    • Item icon Closing the file
    • Item icon File closing checklist
    • Item icon File review form - General
  • Item icon Comments and suggestions for By Lawyers

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