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At MG Legal, we know that our wills and trusts clients like to know where their hard-earned money will end up, after they have died. That’s why we’ve seen a steady increase of the number of people seeking the expert advice of our Trust solicitors over the last year.
However, for some people, it’s not as simple as gifting money to a person after their death. In fact, they need to be able to let an individual have, or continue to have, benefit from an asset, whilst ultimately ensuring that it passes to another person.
Read on to learn more about your options when it comes to trusts in your will.
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Trust Registration Service and your Will drafting Solicitors
Following the introduction of new rules relating to The Money Laundering and Terrorist Financing (Amendment) Regulations 2019, all UK express trusts (and non-UK trusts which meet certain criteria) that are in existence on or after 6 October 2020 must be registered with the Trust Registration Service (“TRS”).
So, what does this mean for MG Legal’s clients? Our Will drafting Solicitors explain by answering some frequently asked questions (FAQs).
The Trust Registration Service (“TRS”) is an online service established by HMRC to meet the government’s obligations to comply with the fourth and fifth EU Money Laundering Directives. The TRS provides a record of all of the trusts in the UK (and some overseas trusts), except for select exempt trusts.
The TRS was extended in the UK as part of the 5th Anti-Money Laundering Directive to comply with The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 introduced as part of the EU anti-money laundering directive, which aimed to stop money laundering, serious crime and terrorist financing. In simple terms, the Trust Register will provide greater transparency surrounding the ownership of assets held in Trust and the persons connected with Trusts.
Following introduction of the regulations, in the UK all express trusts which were liable to pay tax in the UK were required to register with the TRS. The Brexit Withdrawal Agreement stipulated that the UK must maintain the TRS.
In October 2020, new rules were introduced which require all UK trusts (expect those which are exempt) and any non-UK trusts which meet certain criteria, to register with HM Revenue and Customs [“HMRC”] using the TRS, providing that they were in existence on or after 6 October 2020.
Some common trusts which do not usually need to be registered with the Trust Registration Service are:
Trusts created following a death, which are wound up within 2 years
Trusts created by legislation (the law) or a Court Order
Bank accounts for minors
Property trusts where one of the owners is a minor
UK pension schemes
There is a full list of non-registerable trusts, and the conditions that need to be met to be exempt, are available on gov.uk.
The trustees must decide who the lead trustee will be. The lead trustee can then register the trust on gov.uk. Our Trust Solicitors would suggest seeking legal advice before taking any steps to register the trust, to ensure that the registration is dealt with correctly.
What is an Estate?
A person’s Estate is made up of everything that they own at the date of their death, minus any liabilities or debts that need to be paid out of the assets.
For example, Mr A owns a property worth £200,000, has savings and cash worth £35,000, and has Premium Bonds of £15,000. His total Estate is therefore worth £250,000. In terms of debts and liabilities, Mr A has a credit card worth £5,000 and his funeral costs come to £3,000. His final Estate is therefore worth £242,000.
If you are looking to seek legal advice regarding your estate and Will trusts, or acting as an executor of an estate including with a trust, get in touch with our specialist Trust solicitors online today and speak to Trust Solicitors within one working hour about how we can help you today.
Will a trust impact Inheritance Tax?
Most types of trusts will have Inheritance (and, potentially, other types of) tax implications. However, a Bereaved Minor Trust or an 18 – 25 Trust differs. Even if the value of the trust is over the nil rate band (currently set at £325,000 as of August 2023), there will be less tax payable, if any.
In an 18 – 25 trust, if a child over the age of 18 receives a payment from the trust, there may be a charge to inheritance tax if the trust fund exceeds any nil rate band. The charge will depend on how long after the age of 18 any payment is made.
For advice on whether inheritance tax is payable on payments made under a Bereaved Minor Trust or an 18 – 25 Trust, contact HM Revenue and Customs. Or, to seek expert legal advice from a Trust Solicitor, contact our team online here and speak to a solicitor within one working hour about our expert, fixed-fee legal services.
Can I setup a trust for my children?
Our local Trust Solicitors know all too well that when making a Will it can be hard to think of what would happen if you died whilst your children or step-children are still minors. No one wants to think of leaving their children when they are still so young. However, it can happen, and therefore our expert Trust Solicitors would discuss with you when a child can legally inherit, and what options you have to protect their share of your Estate.
Below our expert Trust solicitors have explained what an Estate is, when a minor can inherit from an Estate, and what this means for their inheritance.
How can I leave my Estate to my children?
If you want to make a gift to your children, or they are to be named as the beneficiaries of your whole Estate, you may decide to simply leave them everything, without specifying an age. In these cases, under law, any children would be entitled to inherit at 18. If this is the case, it will depend on how old your children are when you die, as to what happens to your Estate.
Simple Gifts
If your children are over 18, you may simply gift your Estate to them.
Bare Trusts
This is when a share of an Estate is left to any beneficiary, who is a minor when they inherit the share. The money will be held by the Trustees for the child’s minority and, once they have turned 18, the money will be theirs to look after themselves, and any trusts come to an end. With this type of trust, the share of the Estate always belongs to the children, however it is held on their behalf.
Bereaved Minor Trusts
Where a Will leaves an Estate to children, on the condition that they attain the age of 18, this will usually create a “Bereaved Minor Trust”. This type of trust is also created if a child inherits under the Rules of Intestacy.
For the purposes of this type of trust, the child must be legally your own child or a stepchild, and would not include grandchildren, nephews, nieces or other minors who are to benefit under your Will.
18 - 25 Trusts
If you leave a gift or a share of your Estate to a minor upon them reaching a certain age, up to the age of 25, this can create an “18 – 25” trust. Again, only parents can create this type of trust for their own children or stepchildren. This type of trust means that the trustees are not obligated to pay the money to the children until they attain the specified age.
There are, of course, other trust provisions or methods of leaving your Estate to your children however, for the purposes of this blog, our expert Will drafters are only discussing the above trusts.
How old does a person need to be to receive inheritance?
Like a lot of other things in life, a child is classed as a minor until they attain the age of 18, and therefore, they cannot generally receive any inheritance until this age. This age limit is referred to under the Trustee Act 1925, and can be found in the Family Law Reform Act 1969.
There are some exceptions to this rule, for example, if a gift is left to a child upon them turning 16, however, if you want to make this kind of gift in your Will, you should always seek legal advice from an expert Will drafter to ensure that the gift is worded in the correct way. If it is not, it could create issues after you have died, with the gift.
Discretionary Trust
With these types of Trust provisions, you leave your Estate, or part of it, in Trust, deciding who the potential beneficiaries will be when you die. This could include those who are not yet born, for example, grandchildren or great-grandchildren who you think may come along, but haven’t yet.
With this type of Trust, in your Will you would appoint Trustees, who would be responsible for managing and implementing the terms of the Trust. The Trustees would be able to use their discretion to decide which of the potential Beneficiaries, or the people who eventually become Beneficiaries, receive funds or assets from the Trust. Not all of the potential Beneficiaries will ever receive anything, as the decision is completely made at the discretion of the Trustees.
We would usually prepare a letter of wishes, which stipulates how you would like the Trustees to apply the funds of the Trust. To learn more about the services of our specialist solicitors for Wills and Trusts, and speak to us about how we can help to ensure that your wishes are met, contact us online here and speak to a solicitor for wills within one working hour.
One reason that a Discretionary Trust may be an option in your Will, is if you let our Trust Solicitors know that you intend to see how events in the future pan out before deciding who you would want to receive what, so you want the flexibility to change your letter of wishes in the future. Although, this would always be on the understanding that the Trustees do not have to follow your wishes, if they did not want to. Alternatively, you may feel that one of your loved ones is not good at managing money, for example, if they have a problem with alcohol or drugs, and you may therefore decide that you do not wish to leave them a large amount of money to ‘blow’ in one go. Therefore, the Trustees would be able to use their discretion to decide when or if that person received any money.
Another use for this type of Discretionary Trust would be if the person who you wish to leave money to are in receipt of means-tested benefits or cannot manage their own affairs due to being a minor or mentally incapable. This type of Discretionary Trust allows the Trustees to manage the money on behalf of the potential Beneficiaries. To speak to a solicitor for wills about your options, and seek expert legal advice today, simply get in touch with us online here and speak to a solicitor within one working hour about how we can help.
Mr Smith, a farmer, wishes to allow his three children to receive his farm and business when he dies. However, he only wants the child or children who end up following the same career path to receive this. Unfortunately, his children are all very young and he is concerned that leaving it to all three of them equally could lead to disagreement in the future.
He approaches his local solicitors for Wills to discuss the issue, and they propose placing the farm and business into a discretionary trust. Mr Smith should prepare, or instruct his solicitor for wills to prepare on his behalf, a letter of wishes, outlining what he would like the Trustees to do with the assets. He can then update this letter throughout his life, as the circumstances change.
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Property Trust Provisions
One way to ensure that assets are held for a certain person, whilst another person continues to be able to enjoy them, would be a trust in your Will. A common way of doing this is through a Property Trust Will.
Frequently used by spouses, civil partners, and cohabitees, each co-owner includes provisions in their Wills, leaving their respective shares of the property to their intended beneficiaries, such as their children, granting the surviving spouse a right to live in the property for their lifetime, or for a shorter time span if required.
Benefits of an IPDI Trust
The benefits of including this type of trust provision in your Will, as well as the care benefits listed above, also mean that if Mrs S remarried, the share of the property held in trust would not be included in any divorce agreement, and would not pass to the new spouse. In addition, if Mrs S had a disagreement with her children and decided to change her Will to not include them, they would still be guaranteed the share of the property left to them by their father.
Things to consider
As you would when making a more-straightforward Will (i.e. one without any trust provisions), you would need to consider the Inheritance Tax implications of including IPDI provisions in your Wills. To discuss this further, contact MG Legal’s expert local solicitors for Wills to arrange a consultation. We will be able to discuss the benefit of the provisions, what these entail for the surviving spouse, and any Inheritance Tax implications.
Costs of including IPDI provisions in your Will
The costs of the provisions required can depend on what exact provisions will be included in your Wills. However, generally a married couple could expect to pay an additional £250.00 plus VAT on top of the costs of straight-forward mirror Wills. You can find out the cost of mirror Wills on our fixed-fee page, here.
In addition, when our clients instruct us to include IPDI provisions in their Wills, we need to be able to check how their property is owned. This usually costs £3.00 to obtain these documents from the Land Registry, unless the property is unregistered, in which case we will need sight of the original Deeds.
If the property is owned as Tenants in Common already, so each spouse owns a separate 50% share (or even, in some cases, different shares), there will be no additional work required.
However, if your property is currently owned as joint tenants (so on the death of one survivor, the property passes under the survivorship rule to the surviving owner), the tenancy will need to be severed to change it to the ownership set out above, Tenants in Common.
Our charges for changing the way a property is owned are usually in the region of £75.00 plus VAT, plus the £3.00 Land Registry fee to check ownership.
Instructing MG Legal to Draft Wills including IPDI Provisions:
Our team of solicitors for wills are here to help, so if you wish to make a Will, we can discuss IPDI provisions with you during your initial appointment, without any additional costs. That way, you can decide whether you wish to proceed with a straight forward Will, or whether IPDI provisions would be the better option for you.
If you wish to simply discuss the effects of an IPDI Will before you proceed with making a Will, we can offer an initial consultation for a fixed fee of £125.00 plus VAT. We can provide you with a write up of the consultation for a small additional fee. This way, you can consider your options before discussing a Will in any detail.
Your Residuary Estate
This is anything that is left after any liabilities, debts, testamentary expenses, funeral expenses, pecuniary legacies, and legal fees have been paid out.
You can choose as many people as you want to divide your residuary estate between, with our Wills Solicitors have seen Wills naming 35 people.
At this stage, our local solicitors for Wills would also discuss with you whether you wish to include any longstop provisions, in case the initial beneficiaries predecease you or the clause fails for any other reason. This could be as simple as a clause leaving everything to your initial residuary beneficiaries’ children, or you may want to name completely different people; the choice is yours.
Trust Registration Service and your Trust Solicitors
Following the introduction of new rules relating to The Money Laundering and Terrorist Financing (Amendment) Regulations 2019, all UK express trusts (and non-UK trusts which meet certain criteria) that are in existence on or after 6 October 2020 must be registered with the Trust Registration Service (“TRS”).
So, what does this mean for MG Legal’s clients? Our Will drafting Solicitors explain by answering some frequently asked questions (FAQs).
The Trust Registration Service (“TRS”) is an online service established by HMRC to meet the government’s obligations to comply with the fourth and fifth EU Money Laundering Directives. The TRS provides a record of all of the trusts in the UK (and some overseas trusts), except for select exempt trusts.
The TRS was extended in the UK as part of the 5th Anti-Money Laundering Directive to comply with The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 introduced as part of the EU anti-money laundering directive, which aimed to stop money laundering, serious crime and terrorist financing. In simple terms, the Trust Register will provide greater transparency surrounding the ownership of assets held in Trust and the persons connected with Trusts.
Following introduction of the regulations, in the UK all express trusts which were liable to pay tax in the UK were required to register with the TRS. The Brexit Withdrawal Agreement stipulated that the UK must maintain the TRS.
In October 2020, new rules were introduced which require all UK trusts (expect those which are exempt) and any non-UK trusts which meet certain criteria, to register with HM Revenue and Customs [“HMRC”] using the TRS, providing that they were in existence on or after 6 October 2020.
Some common trusts which do not usually need to be registered with the Trust Registration Service are:
Trusts created following a death, which are wound up within 2 years
Trusts created by legislation (the law) or a Court Order
Bank accounts for minors
Property trusts where one of the owners is a minor
UK pension schemes
There is a full list of non-registerable trusts, and the conditions that need to be met to be exempt, are available on gov.uk.
The trustees must decide who the lead trustee will be. The lead trustee can then register the trust on gov.uk. Our Trust Solicitors would suggest seeking legal advice before taking any steps to register the trust, to ensure that the registration is dealt with correctly.
As well as details of the lead trustee, our Trusts Solicitors understand that the following information will need to be provided for both taxable and non-taxable trusts:
The name of the trust.
The date it was created.
Whether the trust is an express trust.
Whether the non-UK trust has a business relationship in the UK (if applicable).
Any UK land or property the trust purchased.
The lead trustee’s name, date of birth, National Insurance number (if they are a UK citizen) or their passport details and address (if they are not a UK citizen), telephone number, and country of residence and nationality. If the lead trustee is an organisation, you must provide their name, unique taxpayer reference (known as a UTR), address, telephone number, email address and country of residence.
If the person who created the trust is deceased, you must supply their full name, date of birth, date of death, and last known country of residence and nationality.
Details of all known beneficiaries (you can supply details of 25. If there are more beneficiaries, you will need these details for your own records). Beneficiaries could be named individually, or they may be a class of people (i.e. grandchildren and great-grandchildren of a certain person). If the beneficiaries are a class, you will need to provide a description of the class.
If a trust was in existence on 6 October 2020 but was subsequently ended, it would likely still be registerable.
A trust created by the Will of a deceased person is excluded from registration for a two-year period from the date of death. If the trust is still in existence two years from the date of death (or if it accepts additional assets from outside the estate) it will then become registerable.
If you are in any doubt as to whether a Trust is registerable, we would suggest you seek independent legal advice from your local solicitors.
A person can make a request to view information stored on the Trust Registration Service, providing that they have a legitimate interest. This could include agencies investigating money laundering or terrorist financing.
If a trust is non-taxable, and was in existence on or before 6 October 2020, it must be registered with the Trust Registration Service by 1 September 2022. If the trust was created after this date, it must be registered within 90 days or on/before 1 September 2022 (whichever date is later). Any changes to a trust, either the details or the circumstances of the trust, must also be registered within 90 days.
If a trust is taxable, different rules apply depending upon when the trust was created, what kind of tax the trust has a liability for and whether the trust has had a previous liability for Income Tax or Capital Gains Tax.
For those taxable trusts created on or after 6 April 2021, the trust must be registered within 90 days of it becoming liable for tax, or on/before 1 September 2022 (again, whichever date is later).
Alternatively, seek advice from your local Trust Solicitors.
The trustees of the trust have a legal obligation to register the trust with the Trust Registration Service, unless the trust is exempt. If a registerable trust is not registered, the trustees can face penalties, although they may receive reminder letters from HMRC before any penalties are imposed.
Based on current legislation, some Will trusts will never need to be registered as they will end within 2 years of the date of the testator’s (the person who made the Will) death.
However, if there is an ongoing property trust created by a Will (for example, for those of our Trusts Solicitors' clients who have severed the joint tenancy on their property leaving their half share to someone other than the co-owner) or if, post death, there is an ongoing minor trust, this may give rise to a need to register the Will trust.
The Will trust is not created until after the testator has died, and therefore does not need to be registered during the testator’s lifetime. However, following a death, the need to register a trust may arise, and you should therefore seek expert legal advice at this time.