Administration of trusts

Trustees—introduction to trustee powers

The trustees' powers may be either:

  1. administrative, ie powers relating to prudent management in the discharge of the trustees' duty to maintain the trust estate, or

  2. dispositive, ie powers intended to have an actual effect on the benefits that the beneficiaries become entitled to receive

The distinction, though, may not always be easy to draw but trustees must properly exercise their powers in an impartial manner.

Modern trust documents include extensive powers to enable the trustees to administer the trust property with the maximum possible flexibility to facilitate the simplified running of the administration of trusts.

See Practice Note: Trustees—introduction to trustee powers.

Trustees—duties

A duty is obligatory. Failure of a trustee to perform a duty constitutes a breach of trust.

See Practice Note: Trustees—duties.

Trustees—statutory powers of trustees

All trustees have certain powers conferred on them by statute, in particular by the Trustee Act 1925 (TA 1925) and the Trustee Act 2000 (TrA 2000), for example:

  1. power to insure

  2. power to delegate trusts, powers and discretions by power of attorney

  3. power

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FTT holds that OIGs and AIPs arising in offshore protected trusts are not protected foreign source income (Louwman v Revenue and Customs Commissioners)

Private Client analysis: The case of Louwman v Revenue and Customs concerned Ms Louwman, a UK resident non-domiciled taxpayer who had set up offshore protected property trusts on 7 March 2017, just prior to the implementation of the deemed domicile regime on 6 April 2017. Ms Louwman sought to shield income and gains in those trusts from taxation after she became deemed domiciled for the tax year commencing 6 April 2018, on the basis that the trusts were offshore protected property trusts and the income and gains in those trusts would not be attributed to her on an arising basis. HMRC assessed Ms Louwman to income tax on the basis that offshore income gains (OIGs) and accrued income profits (AIPs) that had arisen in the offshore protected trusts were subject to income tax on an arising basis. Ms Louwman resisted the assessments on the basis that these items of income were ‘protected foreign source income’. The matter went to the irst-tier tribunal for determination and the tribunal considered that the items of income were not ‘protected foreign source income’ on the basis that they could not be said to have a source, and particularly a foreign source. The tribunal therefore considered that they should be subject to income tax. The tribunal also considered that it was not appropriate to take a rectifying interpretation of the definition of ‘protected foreign source income’ in section 721A of the Income Tax Act 2007 (ITA 2007) even though OIGs and AIPs may have been omitted from the definition of protected foreign source income by the inadvertence of Parliament. Written by Ben Symons, barrister at Old Square Tax Chambers.

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