The following Trusts and Inheritance Tax guidance note by Tolley in association with Lynne Bradey of Wrigleys Solicitors LLP provides comprehensive and up to date tax information covering:
Winding up a trust involves paying off all liabilities and then distributing the remaining funds to beneficiaries in accordance with the terms of the trust deed. Note that once an existing trust has no assets or funds in hand, it is considered to be fully terminated, and the trustees discharged from office.
Trustees should always consider winding up a trust where the costs of continuing administration are unacceptably high, or where the trust will incur high levels of taxation which would not apply if the funds were in the hands of beneficiaries. Beneficiaries may request distribution of the funds and it will then be for the trustees to weigh up the position and consider whether a distribution is appropriate in all the circumstances. If there is a letter of wishes in existence from the settlor they can be guided by that. If all possible beneficiaries are of full age and capacity, and are in agreement on the matter, they may direct the trustees concerning the distribution of the funds under the principle in Saunders v Vautier.
However, sometimes there are good reasons for continuing a trust, despite the financial disadvantages of doing so. For example, continuing the trust may protect it from claims made against beneficiaries and may enable the funds to be better preserved for future gene
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