Trusts Flashcards
(114 cards)
What are the main duties of a trustee
Must adhere to the trust deed
Protect the trust property
What is the memory mnemonic for duties of a trustee
One - bun = bun terms Two - shoe = shoe of loyalty Three - tree = tree of efficient management Four - door = personally door Five - hive = hive of beneficiaries Six - sticks = sticks of account
What is an express trust
Terms of the trust are expressly set out usually in writing
What is an implied trust
Not expressly created but implied by the actions and intentions of the parties.
An example would be where a business partnership buys a property and arranged for the conveyance you to one of the partners only. That partner then holds the property on trust for all the partners
What is a presumptive trust
Where one person purchases a property in the name of another l.
No presumption where one buys property in the name of a child or spouse that is presumed a gift
What is a set purpose trust
Doesn’t benefit a beneficiaries exists for a purpose eg maintain a building
What is a successive trust
Property held in trust for a succession of interests taking effect one after another.
The final successive trust is called the ultimate trust
What is a constructive trust
A trust imposed by law regardless of intentions of parties involved
What is a resulting trust
Where there is a failure of the trust in which the property is held.
What are the main disadvantages of trusts
The settlor will no longer have access
Bare/absolute trusts cannot be changed once created
Settlor must survive for 7 years for the gift to drop out of estate
discretionary trusts suffer tax on entry exit and tenth anniversary
income tax on discretionary trusts are highest after standard band
What is a discretionary trust
Relevant property trust where the beneficiary has no specific right to income or capital if the trust. Distributions are entirely at discretion of trustee
Trustees have the power to accumulate income
What are relevant property trusts
Trusts that create flexible successive or contingent interests
What kind of trust is a flexible power of appointment trust (interest in possession)
Relevant property trust
Prior to March 2006 they were treated as PET
what are the benefits of an excluded property trust
transfers into trust are not considered transfers of value for UK IHT
the trust is not subject to relevant property charges (exit and periodic
beneficiaries can include settlor, spouse children etc without gift with reservation implications
assets outside of the settlors estate for UK IHT purposes
What is immediate post death interest
Where a settlement into trust was effected by will or intestacy.
Where the beneficiary became beneficially entitled to the interest in posession on death of the testator or intestate
What is the benefit of a immediate post death interest trust
the trust will not be a relevant property trust.
the person with the IPDI will be treated as owning the trust fund for IHT purposes and there will be no periodic or exit charges.
If the trust is set up for a surviving spouse then the nil rate band of the first spouse will remain intact
What is an accumulation & maintenance trust
type of discretionary trust
one or more beneficiaries would become legally entitled to capital of the trust or income from it on reaching a certain age not later than age 25.
until reachin specified age trustees hold the income but could apply income for maintenance education or benefit of the beneficiaries
Used to have preferential IHT treatment if trust did not last for longer than 25 years (unless grandparent set up for grandchildren)
What are statutory trusts
a trust created by statute
What are the main reasons for creatin a Trust
Tax planning and mitigation
Intestacy
Will planning
To provide a pension
To provide for families
To assist a charity
To give property to those who cannot legally hold it
To provide for disabled or vulnerable persons
To gain protection from creditors and business protection
What are the main advantages of a trust
IHT mitigation Control some trusts allow the settlor access as well as IHT mitigation Protection Flexibility
What are the main disadvantages of trusts
The settlor will no longer have access
Bare/absolute trusts cannot be changed once created
Settlor must survive for 7 years for the gift to drop out of estate
discretionary trusts suffer tax on entry exit and tenth anniversary
income tax on discretionary trusts are highest after standard band
What must the trust deed set out
It should specify the trust property name the trustees and beneficiaries set out the power of the trustees set out the rights of the beneficiaries where appropriate fulfil the normal requirements of a deed of assignment - deed to be signed and witnessed by settlor, trustees and witnesses independent of the trust parties to show their acceptance of that position
What is an excluded property trust
offshore trust suitable for UK tax residents who are non UK domiciled and have overseas property. there are IHT advantages as overseas assets can be settled without being liable to UK IHT.
It is a discretionary trust
remains excluded if settlor becomes UK domiciled
What are the key elements of an excluded property trust
Trust should be made when the settlor is non dom
assets settled must be non UK assets and never based in the UK
once settlor is deemed UK dom no further assets should be transferred into trust
residence status of trustees is not relevant