Is It Necessary for a Lay Trustee to Consult with a Lawyer?
A trustee is required during a private client estate planning process or while preserving assets for loved ones. However, most of the time, these are inactive. One needs to take action only when the trust is being set up or when the assets are being distributed. Further action is also required when the trust needs to be wound up, and these events are strictly done under legal supervision from a lawyer. So, let’s get to know when a lay trustee should consult with a lawyer.
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- What are the requirements during the trust period?
When a trust is being set up, or any changes are made based on its terms, you must update or register it. The Trust Registration Service goes through a legal process with specific requirements that the trustee must fulfil.
The trustee must register the trust; if they fail, they might have to pay a fine. If you have been appointed as a trustee for a new trust, you must always contact a lawyer to understand the Trust Registration Service. Legal guidance is also required if a trustee offers an existing trust that has yet to be registered.
You have to submit an annual tax return to report the tax due to HMRC, which applies only if the trust is subjected to income or capital gains tax. Legal advice is required when completing the tax returns or through tax mitigation, which is applied to the specific trust for which you have been appointed as a trustee. There is a possibility that the asset that has been held within the term will have a unique tax benefit. Now, if the tax is overpaid, you might find that you are personally liable to beneficiaries, and this generally happens when you fail to get legal advice.
When setting up a trust, the inheritance tax or money payout must be considered. A lawyer can help ensure that the inheritance tax is fully considered and reported. It would help if you recorded all your decisions as a trustee.
A deed is required after the decisions are confirmed and recorded, as it is time to implement them. The deed needs approval from relevant parties, can be drafted with the help of Strategic Lawyers, and they must sign this specific formal legal document. The parties who need to sign are the trustees, the beneficiaries, the person who originally set up the trust, and all the new parties added.
- What happens when the trust ends?
You must notify the Trust Registration Service when the trust ends, and any final tax return must be submitted to HMRC. In this case, there are chances of inherited tax being triggered, which you have to report separately to HMRC. To formally record all the discussions about the trust, a deed has to be prepared that mentions all the discussions being done during the trust period, and a lawyer should be consulted.
Summing it up
The trust accumulates income, and becoming a trustee is also easy. However, when actions are required, things can get complicated as you have to go through rules and requirements, which include legal terms. To ensure compliance with the role, an experienced lawyer is required.
