Investments And Admin Of Trusts Flashcards
What are the investment duties of trustees
Maximise return of trust fund
Not to put trust fund at risk -speculative investments
Act honestly and prudently
What do trustees need to consider when carrying out investment duties?
Can invest in same range of investments as an absolute owner - individual
Consider suitability
Consider need for diversification
Have regard for standard investment criteria
Obtain and consider proper advice
Comply with standard duty of care
When exercising care and skill what must trustees pay regard to?
Any special knowledge/expertise they have
Any special knowledge/expertise they would reasonably expect to have as a professional trustee in there profession = solicitor would be expected to exercise a higher duty of care/skill
Considerations for trustees if investing a IIP in AIM listed portfolio?
Trustees have statutory duty of care
AIM listed equities are smaller,higher risk companies and tend to be speculative in nature
Consider need for diversification - investing in AIM only may not be suitable
Use upmost due diligence to avoid loss
Consider interest of all beneficiaries
If beneficiary entitled to income for life which AIM may not produce sufficient - may penalise life insurance tenant.
Obtain and consider proper advice from suitably qualified professional.
Unless trustees have relevant experience and expertise
Think how these type of points can be applied to different trusts and investments.
How to place an existing life policy in trust?
Write existing policy under trust by executing a suitable trust deed
Adding legal ownership of the policy to trustees using a deed of assignment for the benefit of the beneficiaries
A notice of the assignment should be given to the life office and the deed should be kept with the life policy
What is Requirement for an excluded property trust?
Settlor classed as non-UK domiciled when trust created and when additions made
Must usually be non-UK assets which are held outside the UK
No further assets should be transferred once settlor becomes deemed domiciled
Advantages of EPT
Transfer into trust is not a transfer of value for IHT purposes
Not subject to periodic/exit charges
Settlor/ Settlors spouse/children can be beneficiary with no GWR
Trust assets outside estate for IHT purposes
Trusts excluded from trust registration?
Interest in possession trust created before 22 March 2006
When property is subject to transitional serial interest made before 5/10/2008
Under terms of IPDI trust
When beneficiary is a disabled person/vulnerable
When property is for a bereaved minor
Property is 18-25 trust
Bare trusts
Excluded property trusts
When does a trust have to be registered for TRS?
The trustees must register the trust with the TRS within 90 days of the date the trust was created.
What are the penalties for not registering a trust with TRS on time?
A penalty of £5,000 may be payable for failure to register on time
Non penalty for first offence unless the trustees deliberately fail to register.
What is the impact on Stamp Duty land tax on a discretionary trust buying a residential property?
Charged at higher rates £125k 3%
125k to 250k 5%
250 to 925 8%
925 to 1.5 13%
1.5 15%
Trustees would be liable to SDLT
To avoid higher rates but through a Bare trust
How to calculate periodic charge on disc trust?
Value in excess of NRB
X 30% of lifetime rate of 20% = 6%
Calculate effective rate of tax value from above/trust value
Apply effective rate back to trust value
£450,000 - £325,000 = £125,000 x6%
= £7,500/£450,000 = 1.67%
£450,000 x 1.67% = £7,515
How to maintain reporting status of offshore funds?
Must apply to HMRC for reporting fund status
Will be granted where funds report details of all its income to HMRC
Fund retains reporting status as long as it complied with the reporting fund rules.
What’s is the taxation of a reporting or non-reporting of offshore funds?
Reporting fund
Subject to income tax whether distributed or not
Dividends and interest are treated in the same way as UK based funds
Any capital gains treated as UK
Non-reporting
Calculate gains on CGT principles but no annual exempt amount
Gain taxed at 20, 40, 45
No starting rate, div allowance or psa available
