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Probate and Trusts

If you are an Executor under a Will, need help in dealing with the Estate of a person who has died without a Will, or if you need help with Trust advice, please call Andrew Robinson or John Sinel on 01329 236 171 or email us.

Some more information about Probate and Trusts is given below.

Probate

Executors appointed under a will would usually have to obtain a grant of probate before they have authority to deal with the assets in an estate. The procedure for obtaining a grant of probate will vary depending upon the nature of the assets and their value.
 
If an estate is “excepted” (i.e. the value of the assets and relevant lifetime gifts is under a certain figure) then executors will need to complete a Return of Estate Information for the Inland Revenue and sign an Oath before forwarding the return, the Will and the Oath to the Probate Registry. A fee will be payable to the Probate Registry and a grant of probate should follow within three to four weeks. Once a grant of probate is received then the executors have authority to deal with assets within the estate and can proceed with the administration.

If the estate is not “excepted”, then the executors will need to complete a detailed Inland Revenue Account and pay any tax that may be payable on the death before forwarding the Will and Oath to the Probate Registry. There are stringent penalties imposed upon executors by the Inland Revenue if the executors fail to include in the Inland Revenue Account full details of all assets.

Trusts

What is a Trust?

In some cases, because of their age or mental incapacity, beneficiaries may not be able to properly look after assets themselves. A trust would therefore be created under such circumstances in order to protect their interests.

Trusts can also be created for tax-planning reasons. The most usual types of trusts which can be created are:

Bare Trust

This type of trust is not, strictly speaking, a trust at all.

An asset is held in the names of trustees, but the trustees only nominally own the assets within the trust. The real owners are the beneficiaries. Such trusts arise commonly when children are entitled to assets but they are not old enough to have legal authority to deal with those assets.

Discretionary Trusts

The trustees of a discretionary trust have discretion as to how they treat the assets within the trust, and this applies to both capital and income in the trust.

The trustees will not normally have absolute discretion, as the creator of the trust ("the settlor") will stipulate the people or charities in respect of which discretion can be exercised. If a settlor is concerned about the way in which trustees can exercise their discretion then, in the case of a lifetime settlement the settlor can be a trustee himself. In all settlements the settlor can also sign a letter of wishes, which gives non-binding instructions to trustees as to how the settlor would wish their discretion to be exercised in the future.

Interest in Possession Trust

This is a trust whereby a person (normally known as a tenant for life) is entitled to income from the trust but is not entitled to the capital.

As an example, such a trust would be established when, say, one spouse dies and wishes to leave sufficient funds to the surviving spouse for the rest of his or her life, but at the same time wishes to ensure that he or she cannot dispose of the capital assets.

Accumulation and Maintenance Trust

This type of trust is a special type of discretionary trust. The beneficiaries must all be grandchildren of a common grandparent (not necessarily all children of the same parent), and a beneficiary must receive part or all of the income on or before his or her twenty-fifth birthday. Until then, the income must either be used for his or her maintenance, education, or benefit, or be accumulated.

What are the responsibilities of a Trustee?

The provisions of the Trustee Act 2000 can affect any trusts, even those established well before the Act was made.

There is a duty on trustees to invest funds in their care, with a view to gaining a financial return for the trust. In performing this duty they must exercise proper care, which requires more than just good faith and honesty. Trustees have to be sufficiently proficient so as to observe some standard investment criteria, including:-

  • Suitability to the trust of the kind of investments which may be made.
  • The need for diversification and investment so far as is appropriate to the circumstances of the trust.

Trustees have to exercise their duties honestly and fairly, and the circumstances of each trust must be taken into account on an individual basis.

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