UK TRUST SET UP & TRUSTEE SERVICES
Families have been setting up a trust to preserve and manage their wealth for centuries. Unlike corporate vehicles, the lack of rigid formal requirements for the creation and operation of trusts, and the tremendous flexibility of trust instruments, make them uniquely useful for estate and succession planning.
Although many of the tax benefits that were associated with trusts have been eroded in recent years by anti-tax avoidance legislation, they still offer great advantages – particularly for individuals who:
Types of Trust
A trust is a legal arrangement resulting from a transfer of assets (the trust fund) by a person (the trust settlor) to one or more persons (the trustees) for them to hold for the benefit of specified persons (the trust beneficiaries).
Generally the trust terms are set out in a trust deed or will and include the names of the beneficiaries and how they can benefit from the trust fund. The main types of trust include:
- Interest in possession (or ‘fixed-interest’) trust – the beneficiaries may be given a right to income and/or capital, often on the occurrence of a specified event.
- Discretionary trust – the trustees have wide powers to decide how the beneficiaries benefit from the trust fund. Settlors often provide the trustees with a letter of wishes for guidance.
- Bare trust – the beneficiary has an outright entitlement to the trust fund and any income it may yield. These are often used to benefit minors or others who do not have capacity to hold the legal title in their own name.
Advantages of Trusts
A properly drafted and managed trust can confer advantages under any or all of the following heads:
Trusts and Domicile
Offshore trusts can be particularly effective in cases where an individual is about to change residence or domicile and wishes to gain protection from UK inheritance tax (IHT).
Non-UK domiciled individuals (non-doms) who elect to become deemed UK domiciled and therefore exposed to IHT on their worldwide assets should place their non-UK assets in an offshore trust before they do so. These assets will then be ringfenced from IHT indefinitely.
Similarly UK expats who have succeeded in shedding their UK domicile of origin by establishing a new domicile of choice in their current place of residence, run the risk of reverting to their UK domicile of origin – and their exposure to IHT – if they leave that country and move their residence to another country.
They should therefore take the opportunity to transfer the bulk of their assets into trust before moving their residence. Non-UK sited assets that are placed into trust while the transferor has acquired a domicile of choice will not form part of their UK taxable estate for IHT purposes, even if the transferor moves to a third country and revives his/her UK domicile of origin. This exclusion will not apply, however, if the transferor returns to the UK.
Sovereign has more than 30 years’ experience of setting up and managing various types of trust both in the UK and overseas. In addition to the UK, we are also authorised and licensed to establish trusts and provide professional trustee services in: Cyprus, Gibraltar, Guernsey, Hong Kong, Isle of Man, Malta, Mauritius and Singapore.
Please contact us if you have any questions or queries and your local representative will be in touch with you as soon as possible.
