Trusts have become more popular as an everyday tax and succession planning tool. Check out these blogs for some of the reasons why you actually might want to include trusts when undertaking estate planning:
However, as a general rule, trusts are often poorly understood by lay clients and in fact many advisers do not truly understand the tax implications that can arise. As a result you may find yourself dealing with a trust that is either no longer fit for purpose or that has completed the task for which it was created and now simply represents an unnecessary administrative burden. So what can you do?
Firstly, take proper professional advice. I cannot stress this enough. You need to speak to someone who specialises in trust administration and is ideally a full member of STEP. Bad advice can be as bad as no advice when it comes to trusts, however if the adviser is a solicitor then you at least have recourse to their professional indemnity insurance if anything goes awry.
The first step will always been to identify what type of trust you are dealing with, what are the assets in that trust and who are the beneficiaries. Each of these will impact the steps needed to wind up the trust and the tax implications of doing so. Some trusts will automatically come to an end when certain conditions are met (such as a beneficiary reaching 18 or 25). Others require deeds of appointment, setting out that the trustee’s exercise of discretion to pay capital out of the trust permanently. In some cases the beneficiaries can decide to end the trust, but not if any of them are minors.
The trust assets are also significant because there can be capital gains or inheritance tax implications when you pay funds out of the trust depending on the type of trust and the nature of the asset being paid out.
But, with all that being said, it is possible to do away with trusts which are no longer wanted, it will just generally involve alot of paperwork and potentially dealing with the tax man.
If you like help with managing or winding up a trust then please contact Ashley Minott on 01494 893518 or by email.