Chapter 3

Question 1

In line with sec 1 of the trustee act 2000 (duty of care) A trustee must exercise such care and skill as is reasonable what does that mean

Answer 1

A solicitor who acts as a trustee will have to exercise our higher duty of care and skill and a trustee who has no such legal training or background

Question 2

Explain standard investment criteria and advice of the trustee act 2000

Answer 2

Trustees must consider the suitability of investments for the fund and the need for diversification.

Should octane and consider proper advice.

No requirement for advice to be confirmed or given in writing but it is best practice

Question 3

Can the trustees favour one class of beneficiaries over the other for the life tenant and remaindermen

Answer 3

They cannot favour one class of beneficiaries over the other they have to balance out the needs of each one and it must be fair

Question 4

Conversion and apportionment -do trustees have to sell wasting assets to be fair for both life interest and remaindermen

Answer 4

No this rule was abolished by the trusty act 2013 which came into force first of January 2014. Unless the Settlor has included a contrary provision

Question 5

Can A trust to be varied

Answer 5

Once the trust is created it cannot be changed or revoked by the Settlor the trustees or the beneficiaries under the trust wording specifically allows this
The trustees of a power of appointment or discretionary trust can vary the beneficiaries or their interest but only within the prescribed class

Question 6

How can beneficiaries bring a trust to an end using the rule in Saunders and Vautier

Answer 6

If all beneficiaries are over 18 and of sound mind and in agreement they can demand the trust property from the trustees and put an end to the trust
If it does not meet all of the above can only be terminated with a successful application made to court

Question 7

What act gives the court power to vary the benefit of unborn children

Answer 7

The variation of trusts act 1958

Question 8

Under the trusty act 2000 what are the trustees duties regarding the funds

Answer 8

The trustees have a duty to maximise the return on the fund.

If you’re not risk the trust fund by investing in hazardous or speculative investments.

There should do you to the specific investment clauses within the trust Powers.

The trustees should not invest in a way to make themselves personal gains if they do they should pay the gains to the beneficiaries.

The trustees must bury mind the interests of all beneficiaries present and future in relation to income and capital for life tenant

Question 9

What are the Differences between charitable trusts and other trusts

Answer 9

A charitable trust cannot be void for uncertainty is for stop

It is not subject to the general law and perpetuities it can carry on forever.

It can only accumulating him for a maximum of 21 years of the life of the Sattler.

If a charitable trust becomes impractical it will not fail and property can be applied to another charitable purpose as close as possible to the original one

Question 10

What income and capital gains tax due charitable trust pay

Answer 10

The investment income is exempt from income taxed it is also exempt from capital gains tax

Disposal by donors are also generally exempt from capital gains tax

Gifts to charities made by individuals in life or on death row exempt from inheritance tax

Since 6 April 2012 if temperamental more of the net estate is left to charity the 40% right for IHT will be reduced to 36%

Just to charitable trusts also qualify for income tax relief on the gift aid or payroll giving

Question 11

How long can a charitable trust continue

Answer 11

Indefinitely

Question 12

What is the tax advantage of creating a trust offshore

Answer 12

There may be some if beneficiaries are not domiciled or resident in the UK but this has been gradually eroded by anti-avoidance legislation

Question 13

What is an excluded property trust

Answer 13

An offshore trust, suitable for UK tax residents who are non Dom and have over seas property
Could be settled into a trust without being Kia or to UK iht

Question 14

What’s domicile of dependence

Answer 14

If a father changes his domicile before the child reaches 16 the child’s also gets changed

Question 15

What’s the deemed domicile rule

Answer 15

For iht it is deemed UK domicile where they have been a UK tax resident for 17 of past 20 years

Question 16

Bob is UK resident but not domiciled what is subject to iht on his death?

Answer 16

Only his UK assets, it would be his world wide assets if he was Dom or deemed Dom

Question 17

What are the key elements to a excluded property trust (non Dom)

Answer 17

Trust and additions should be made when settlor is non Dom
All assets should be non UK assets
Once settlor becomes deemed Dom no more assets can be added
Residential status of the trustees are irrelevant
They are not relevant property trusts and so no periodic or exit charge
Settlor can be beneficiary and no gift with reservation

Question 18

From April 2013 a non Dom can elect to be treated as a UK Dom, what factors should you consider?

Answer 18

Transfers between spouse are unlimited
Non UK Dom can inherit from spouse without iht chg
The election is irrevocable
The election can be deferred until after the death of the spouse