The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
This guidance note provides an overview of the key legal concepts involved in creating a trust. It aims to provide background information to accountants and tax practitioners to assist them in instructing lawyers on behalf of their clients, and in interpreting trust documentation.
Whilst the creation of a trust is clearly the domain of the lawyer, it often falls to the non-legal tax practitioner to explain the tax consequences of so doing. This guidance note summarises the tax considerations which arise on creating a trust and provides links to more detailed material within the module.
The essential nature of a trust is that property is legally owned and managed by trustees for the use and benefit of beneficiaries. To qualify legally as a trust, and therefore be enforceable by law, a trust arrangement must have the following characteristics:
Certainty of intention
It must be clear that the person who created the trust intended to place a binding obligation on the trustee to deal with the trust property as instructed. Evidence of such an intention is best demonstrated in writing with the use of words such as ‘hold on trust.’ The use of precatory expressions such as ‘hope that X will carry out my wishes’ or ‘desire that provision be made for Y’ are not sufficiently certain to create a trust legally enforceable by the beneficiary. The ‘trustee’ will have no binding obligation to deal with the property for the benefit of the beneficiary.
Certainty of subject matter
The property to be held on trust must also be certain. The assets to comprise the trust property must be clearly identifiable and the extent determined.
Certainty of objects
The final certainty concerns those who are to benefit from the trust property. The beneficiaries must be identified or be defined so that they can be ascertained with certainty. See below.
Trustees hold and manage the trust property in accordance with the terms of the trust which, ideally, are
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