The Trust Register-Do you know your duties if you are dealing with the administration of an estate?

In October 2020, amendments to the Money Laundering Regulations came into force introducing new rules extending the scope of The Trust Register (TRS) so that it applies to a wider range of trusts, both based in the UK and some non-UK Trusts regardless of whether or not the trust is liable to pay tax.

Relevant trusts must register with TRS if they are liable to UK taxation in any year.

Although estates themselves are not subject to registration, in some instances Personal Representatives will need to register the estate, for example, if they are selling property worth £500,000 or more. Bearing in mind local property prices, many Personal Representatives may be caught and may be unaware of their obligations.

There are deadlines for registration of new and existing trusts; for existing non-taxable trusts that have not yet been registered this is 1 September 2022.

Trustees are also required to ensure the TRS is kept up to date, and again there are deadlines for doing so.

Types of trusts

The most common type of trust that needs to be registered is an “express trust”. These include bare trusts, discretionary trusts, interest in possession trusts (if created on death they are excluded from registration for two years as with other will trusts), protective trusts, pilot trusts (often set up to receive pension benefits) created before 6 October 2020 containing more than £100, and pilot trusts created after 6 October 2020 regardless of amount held. 

Charitable trusts and Child Trust Funds do not have to register.  Bereaved minor trusts and statutory trusts (created on an Intestacy) do not have to register as an express registrable trust but may have to register if they have a UK tax liability.

For trusts relating to land, eg where two or more people have bought a property together, where the Trustees and Beneficiaries are the same people, there is no requirement to register.  However, if there is a Declaration of Trust in place and the Trustees/Legal Owners of the property are not the same as those with a beneficial interest then the trust is required to register. 

This may occur where a third party has lent monies to assist with a property purchase and wishes to protect their investment, or, for example, children have assisted their parents to purchase a property under the Right to Buy Scheme.

Excluded trusts

Trusts for retirement policies are excluded from registration during the lifetime of the person assured provided that the policy only pays out on their death, terminal illness, critical illness or permanent disablement, or to meet the cost of healthcare services.

Information required

The information required by the TRS can be submitted online and the type of information required depends on whether the Trustees and Settlors (the person or people creating the trust) are individuals or a business or organisation, such as a charity.

Trusts with a UK tax liability need to provide more extensive information, including details of the trust assets as part of the annual tax return. 

There are penalties for failing to provide the information required by the appropriate deadlines.  However, given difficulties with both registering new trusts and updating the register, and a recognition that the last tax year was the first year that trustees have been able to meet their obligations, HMRC had indicated that they will not automatically be charging penalties. However, it is not clear how long this honeymoon period will last.-HMRC has certainly not been lenient on penalties in relation to late reporting of capital gains on UK properties.

If you are the Trustee or Settlor of a trust created at any time or you are dealing with an estate especially one where there is a property to be sold, and you are uncertain as to whether the new rules apply to you, please contact Sherrards and our trust experts will be happy to guide you in the right direction.

To find out more, please contact Private Client Partner Nicole. 

Making a Will: How to Protect Your Family and Financial Assets

It is my firm advice that everyone should make a Will, but if you don’t then it is important to be aware of the consequences of not having one. Without having one in place at the time of your death, or if your Will is no longer valid, the law dictates how your estate will be divided in accordance with the Intestacy Rules. These rules could potentially result in your loved ones not benefiting from your estate in the way in which you would have wanted.

Why make a Will?

Below are some key points of why you should make a one to help protect your family and assets.

  • To avoid your assets being distributed in accordance with the Intestacy Rules which could mean, for instance, your spouse not inheriting all of your estate
  • To ensure that those you wish to inherit your assets on your death get them
  • To nominate executors of your choice to deal with the distribution of your estate
  • To nominate your preferred guardians of your children
  • To make small personal gifts
  • To take advantage of tax saving strategies.

When to update your Will and things to remember

The general advice is to review it every 5 years, or if you’ve had a change in circumstances in the family particularly births, deaths, decisions to marry, divorce, form or dissolve UK civil partnerships.
On marriage or entering a civil partnership (or remarriage or a new civil partnership), your old Will is automatically revoked and has no effect, unless it has been made in contemplation of that marriage or civil partnership and contains a relevant statement to that effect. If you pass away without making a new Will your estate will pass to a list of your relatives specified by law under the Intestacy Rules.
On divorce, any gift in your old Will to your ex-spouse or civil partner is cancelled as is their appointment as Executor but the rest of it stands. This can create problems so normally it is better to make a new Will.

The pitfalls of making a DIY Will

Homemade or “DIY” Wills have become a popular option over the last few years. The appeal is understandable with costs starting from as little as £10 for a pack, and there are also many online companies offering to make your Will for you for a low fee. However, there are disadvantages that comes along with homemade Wills and below are just some to keep in mind before making the commitment.

1. Poor wording and mistakes – Without legal training, DIY Wills can be a minefield. If your wording is incorrect or unclear, you run the risk of your wishes not being fulfilled.
2. Witnesses – They are often incorrectly signed and witnessed, which leads to them ultimately being invalid. This is where the presence of a qualified professional is beneficial, as they ensure mishaps are avoided.
3. Complexities – If you own property abroad, you have foreign investments, or you own a business, you should seek assistance when you it comes to drafting your Will. You want to make sure everything goes to the right person, and complex scenarios aren’t easily catered for in the one-size-fits-all DIY option.

A Will is a legal document, and, as such, legal advice should be sought when you’re in the process of drawing one up. Whether your Will is simple or multi-faceted, the advice that a professional can give you is invaluable and can get you to think about things that may have been overlooked. Having in place a valid Will ensures your loved ones will be well looked after when the time comes. Contact Nicole for more information.

Providing for your pet when you die

The pandemic has also made many of us think about our own mortality. Understandably, people want to ensure that their pets are cared for after they die.

Here are some things you may wish to consider.

  1. Do you want any gift to apply to your current pet only or to any pet which you own when you die?
  2. Do you want your pet to be looked after by a particular person and would they be willing to take on the responsibility? This could include financial provision for the care of the pet by leaving that person an absolute gift.  Should you appoint a substitute beneficiary in case a primary beneficiary is not willing to care for the animal or if they have died before you?
  3. If there is no one suitable or, as an alternative you could consider: –
  4. Leaving your pet to your executors setting out details of care in a letter of wishes. The advantage of a gift to executors is that there is no danger of the gift lapsing and the testator can leave it to the executors to exercise their judgement to find someone suitable.
  5. Make financial provision for your pet through the use of a trust which could give some flexibility (although the trust should be limited to a period of 21 years and there may be practical issues in relation to such trusts such as the associated costs of running a trust);
  6. If you would like your pet to be cared for by an animal welfare charity (e.g. The Dogs Trust), you could leave a gift to that charity requesting them to find your animal a home. It is sometimes possible to register your pet with a charity before you die and a gift to the charity could be used as a default option in case the gift to your primary beneficiary has lapsed.
  7. How much should you leave by way of gift? The popstar, Michael Jackson, left $2 million for the care of his chimp Bubbles and Karl Lagerfeld, the fashion designer, left his cat, Choupette, a significant share of his estate. You should consider the age and life expectancy of the animal (compare a dog with a parrot!), and bear in mind that costs such as medication and vet bills may increase as the animal gets older.

If your pet has insurance, this is something else to be factored in when considering the amount of the gift.

Make sure that financial provision is adequate.  Otherwise, the beneficiary may be reluctant to accept the gift of your pet.  The executors may also have limited power to adjust the level of financial provision in those circumstances unless the residuary beneficiaries are in agreement.

Consequently, you should review your Will from time to time to ensure that any change in circumstances has been considered.  You could also index link the gift to provide for inflation.

Should the gift be conditional on the beneficiary looking after your pet?

Please contact Nicole or the team for more information on making a Will. 

Warning: Probate fees increase

A controversial increase in probate application fees has moved a step closer to being introduced, after being narrowly approved at a parliamentary committee hearing earlier this month. The fee, which is currently £155 when using a solicitor and £215 when people apply directly, will now be applied on a sliding scale according to the value of the estate, with the highest fee capped at £6,000.   The new fees will begin in April 2019 for all applications for grants from that date regardless of the date of death.

Although this increase, dubbed a “stealth tax”, is due to be scrutinised again by the House of Commons in the near future, it is likely that the new fees will be introduced from April.  The changes are projected to add an additional £185 million per year to the Ministry of Justice coffers.   The fees will far exceed the costs of the whole probate court service – it would seem bereaved families are being asked to pay for other parts of the court system – there is a dark irony here where victim’s of crime may, in effect, be part funding the criminal courts.

These new fees seem manifestly unfair and unjustified given that the work involved for the probate court on an application for a grant of probate does not increase in relation to the value of the estate.

The Labour party is believed to be preparing to object to the proposals during its final stage in the House of Commons. However, with the current Brexit wranglings taking most of the limelight and column inches, it may be the case that these unfair changes will just slip in through the back door.

To find out more, please contact Nicole Marmor