Trust and Estate Administration

Estate administration and probate

Estate administration is the process of managing a deceased person’s assets so that they are distributed on death either in accordance with their Will, or the rules of intestacy.

This process is commonly referred to as ‘probate’, but the level of knowledge involved in dealing with this area extends far beyond simply applying for the right grant of representation from the Courts. The process can be stressful and complicated if the correct steps are not followed.

Tax and the estate administration process

Our team covers the full range of legal and taxation issues that may arise during this process. This can include assessing the availability of Business Relief (formerly Business Property Relief) for business owners, Agricultural Property Relief for farmers and landowners and the application of other exemptions and reliefs (such as charity relief or relief against lifetime gifts brought into account on death).

We offer a range of services to the personal representatives of the estate and can:

• Advise you on your duties and responsibilities as an executor and/or administrator under the Will or the rules of intestacy
• Assist with obtaining valuations of the deceased’s assets at the date of death
• Provide legal and technical guidance in liaising with HMRC regarding any inheritance tax liabilities and the preparation of the application for a grant of probate
• Gather in the assets of an estate so that they can be distributed in accordance with the terms of any Will or intestacy
• Assist with discharging any liabilities of the estate and liaising with interested third parties.

In addition, we can prepare any tax returns due up to the date of death and during the estate administration period. We can also deal with the necessary formalities to constitute any trusts established under the Will.

Cross-border estates

International estate administration and domicile

If the deceased held significant overseas assets or is non-UK domiciled, we have particular expertise in dealing with international estates. This includes advising on the distribution of an estate under the rules of succession that are applicable. Where relevant, we can liaise with any advisors you have in foreign jurisdictions to facilitate a smooth administration of the estate.

We can also advise on the very specific issues that might arise for non-UK domiciled individuals who die with assets in the UK and for non-UK domiciled surviving spouses whose partner was UK domiciled at death.

Dealing with contentious probate

In the event that an estate was contested, our Disputes team has the specialist contentious probate expertise to help advise both executors and beneficiaries.

Trust creation

Creating a trust

A trust is a legal arrangement where one person, commonly referred to as the ‘Settlor’, transfers assets to other parties, known as the ‘Trustees’, to hold for the benefit of other persons (referred to as “Beneficiaries”).

When a person establishes a trust, they are not creating a separate legal entity but are imposing a set of obligations and powers on their chosen trustees in relation to the assets they are transferring into trust.

The law of trusts has developed over several hundred years and can be traced back to the Middle Ages when knights would transfer control of their assets to other parties to look after them whilst they were away in foreign lands. Modern trusts are governed by a mixture of the specific powers given to the trustees under the terms of the trust deed and powers that exist in law.  It is important to appreciate both when creating, administering or making decisions about a trust.

Trusts can be established for a wide variety of reasons. Their original purpose was largely for asset protection and that often remains a large part of why someone would decide to establish a trust.  For example, it may be inappropriate to make a gift of significant assets direct to young adults who may experience relationship issues and may not be sufficiently financially mature to deal with those assets.  In other cases, a trust may be a good way to hold assets for truly vulnerable individuals who cannot manage those assets themselves.

A trust will often be established for a combination of reasons including effective tax and estate planning. Common reasons to do so include:

• For long term inheritance tax planning and general asset protection
• As part of the pre-sale tax planning for a business owner
• To establish a tax efficient fund to provide funding for school fees for younger generations, in particular grandchildren.

Trusts and flexible estate planning

The inherent flexibility of a trust means they can be used in a variety of situations and can often cater for the changing requirements of a family as beneficiaries mature and have different needs.

The tax legislation in this area is constantly changing, particularly in relation to offshore trusts, and it is important to receive appropriate advice when creating trusts.

Once we have provided advice and agreed your objectives, we can draft a trust deed which is bespoke to your requirements. Where appropriate, we can help draft a letter of wishes (through which the Settlor leaves guidance for the Trustees) which sits alongside the trust deed.

We can also help with necessary reporting, including submitting appropriate forms to HMRC for inheritance tax purposes and self-assessment taxes. We can also register the trust with HMRC’s Trust Registration Service.

Deeds of variation

We can advise you on whether it would be appropriate to enter into a deed of variation to amend the terms of any Will or intestacy. This can be for tax efficiency purposes or to provide for asset protection for family members. This is useful when, for example, it would not be appropriate for a vulnerable beneficiary to inherit from an estate.

Deeds of variation are a valuable tool to use either as part of administering an estate, or as an estate and tax planning exercise for the original beneficiary.  Provided the relevant rules are complied with, it is possible to redirect assets passing under a Will or intestacy, so it is treated as if the deceased left their estate that way.

It is common to vary estates so that assets pass to other individuals or onto trust. Our team can advise on the best way to structure a deed of variation to meet your objectives.

Trust advice, administration and tax compliance

Trust administration

Trustees have significant ongoing duties and responsibilities. These are imposed both by statute and the terms of the trust itself. It is important that a trustee acts in accordance with the terms and obligations imposed on them. The office of trustee is an important one and should not be taken lightly.

We can support trustees to ensure that they discharge their duties and responsibilities properly and we have extensive experience of dealing with all types of trusts, both in the UK and offshore.

Sometimes there are advantages in appointing professional trustees and we are happy to act as trustees where appropriate. This may either be on our own as trustees or alongside others (whether family members or other professionals).

The management of trusts is also an important factor in ensuring that they are robust and achieve the objectives for which they were created. Our role in relation to the management of a trust can vary dependent upon the circumstances and client wishes.

Advice to trustees

Our team can advise trustees on the ongoing administration of the trust. We can prepare any necessary legal documents which are required during the life of the trust, such as deeds of appointment and retirement of trustees, deeds appointing out the capital of the trust and deeds to rearrange a trust to fit the circumstances at the time. As part of this, we can also provide supporting legal and tax advice.

Our team has extensive knowledge of this complex and sometimes quirky area of law and we have specialist trust managers who administer several trusts on a day-to-day basis.

Trust accounting and tax compliance

In many cases we prepare trust accounts and deal with the trustees’ annual tax compliance under self-assessment.  Trustees will normally be liable for income tax and capital gains tax on the income they receive and gains they realise, and we deal with the annual tax compliance for many trusts.  As with individuals, trustees may also need to complete on-line capital gains returns within 60 days of disposing of interests in land.

As part of the government’s desire to regularise the administration of trusts there is a requirement for most trusts to be registered with HMRC’s Trust Registration Service (the “TRS”). Most organisations, for example banks and investment managers, now require proof of registration with the TRS before they will deal with a trust, and we provide advice on whether your trust needs to be registered and arrange for all the necessary formalities to be complied with.

Where we have created a new trust for you, or are advising on an ongoing basis, we will always confirm whether registration with the TRS is necessary and carry out the registration on your behalf, as well as keeping the TRS up to date.

Inheritance tax and trusts

We are also able to deal with any inheritance tax returns which are required both on establishing the trust and during its lifetime.  For most trusts established since 2006 and for discretionary trusts established before 2006, the trust will normally be subject to what is termed the “relevant property” regime which imposes a special inheritance tax regime on the trust. This can create a charge to inheritance tax at a maximum of 6% on each 10^th anniversary of the establishment of the trust.

We can help plan around these inheritance tax events and prepare calculations and returns for HMRC where necessary.  The complexity of these calculations and returns will often depend upon the history of the trust.

Trusts and offshore interests

Offshore trusts with UK residential property interests (whether held directly or indirectly) or which hold other UK sited assets should also consider their UK tax reporting obligations and we have extensive experience of advising on such matters.

We also advise beneficiaries of trusts on their UK reporting requirements when receiving distributions or other benefits from either UK or offshore trusts.

Understanding types of trust and structures

We have extensive experience of dealing with all different types of trusts. Where a client comes to us with queries about the interpretation of their trust we can advise on its terms and any actions that need to be carried out to regularise the position.

Trust disputes

Where problems arise with trusts, whether through allegations of trustees not performing their duties correctly, failing to distribute assets or not administering the terms of the trust correctly, or otherwise where there is a falling out between several parties to the trust, our specialist Disputes team can provide advice and support on any aspect of a trust that may cause an issue.

Probate and estate administration pricing

More information about our pricing for probate and estate administration services.