Trusts Flashcards
What are the 3 characteristics of a Trust
Intention/words - trust
Subject- property
Objects - beneficiaries
Why are trusts set up (reasons)
Legal and admin purposes if beneficiaries are minors
Protections for mentally incapable beneficiaries
Tax planning purposes
Name 9 main trust law
1925
Trustee act
Law of property act
Admin of estates act
1987 recognition of trusts act
Trustee delegation 1987
Trust if land and appointment of trustees act 1996
Trustee delegation act 1999
Trustee act 2000 (N.I has its own)
p&Acc 1964/2009
IHT and trustee power act 2014
What is common law also known as?
Case law
Precedent law
What is a trust
Where a person (settlor) crests legal obligation over property that requires others (trustee) to deal with property for benefit if others
Overview of trustee power and duty
They are accountable to manage, employ or dispose of assets in accordant with terms of trust
Explain difference in ownership - trustees and beneficiaries
Trustees are legal owners
Beneficiaries have equitable or beneficial ownership - they couldn’t claim on life policy the trustees would have to
Name 5 type of assets
Realty - freehold interest in land
Personality -
- chattels personal -
- choses in action - intangible assets - life policy, CRO, debts, reversionary interests and shares
Could be taken immediately or in the future (debts due to be repaid.
Choses in possession tangible objects or art, Jewellery
Collectives and shares
Bonds (non income producing so no tax returns needed)
What is difference between contract and trust law
Trust
No agreement between parties
Beneficiaries might not know
No offer and acceptance
No consideration
Minors
Trustees legal owners
Contract
Need agreement
Consideration
Cannot make with minors
L
What is a protector
An additional person who has the power to veto certain decision s made by trustees
Good if you have professional trustees
Duties and responsibilities of trustees ( exc investment powers)
- adhere to trust deed
- protect trust property (or deeds/contract notes)
- registered as legal owners
- must act in benefit if beneficiaries impartially
What are the standard trustee investment powers and duties (5)
Take account of standard investment criteria
Review and vary investments as required
Obtain proper advice unless deemed not appropriate
Must invest trust money and review
Take account of tax position
Keep proper account
Act with utmost diligence
Avoid conflicts of interest
Trustee act 1925 - what are 4 statutory powers of trustees
- Power to apply trust income to infant beneficiaries for maintenance, education or benefit
- Override the right to income at age 18 (specified age in trust)
- Can advance a beneficiary their presumptive share - depending on obtaining permission from other beneficiary
- Invest trust assets
When can you replace a trustee? (7)
The appointer or settlor can:
- Trustee dies
- Remains out of Uk for 1 year plus
- Wants to be discharged
- Refuses to act
- Unfit (bankrupt)
- Mentally incapable
- Is an infant
When can you replace a trustee
dies
out of uk for 12m plus
wants to be replaced
refuses to act
unfit or incapable
an infant
What is an appointer and what can they do
in addition to trusts
detailed in trust deed - check wording for powers
normally power to remove trustess
When can beneficiaires retire trustees
All beneficiaries at least 18
have full capacity
absolutely entitiled
If trustee is mentally incapable can direct the attorney to appoint a replacement
What happens on death of trustees (3 scenarios)
- the surviving trustee can appoint replacement
- the last trustee die - their LPR can act until replacement found
- if an appointer they can appoint
What powers cannot be delegated (Trustess) 4
distribution of trust assets
how fees are dealt with
appointment of new trustess,nominees or custodians
delegation of trustee powers
Name some examples of breaches trust
- not paying money due to a beneficiary
- not investing trust money appropiately
What happens to trustees if they breach
- issue an injunction to prevent the trustees baking course of action that will cause the breach
- Order the trustee to make restitution by makking appropriate payment to beneficiary
- order the return of trust property
not liable to compensate losses that would have been suffered if that breach had not been committed.
How can you end a trust (5)
All beneficiaries are ascertained
there is no possibility of further beneficiaries
they are all of full age with capacity
unaminous agreement
Saunders v Vautier
What are express trusts and name some examples (3)
Expressly set out terms of trust
Bare
Absolute
Discrectionary
Relevant Property
what is an enduring EPA & points
Ended October 2007
Both financial and health
Lost mental capacity can use
What are the various requirements for an LPA to be valid ? (5)
written in prescribed form
Donor and attorney must be 18+
Donor must have mental capacity
Donor and attorney must state they understand the POA and the duties
Certificate from prescribed person confirming that the donor undersand the LPA and no fraud/pressure
When can a donor revoke a LPA
They have capacity (donr)
bankruptcy of donor or attorney
death of attorney
dissolution of marriage between donor and attorney
incapacity of the attorney
Explain registratiion process of LPA
Needs to be registered with Office of Public guardian
takes 8-10 weeks
normally registered when creaster
£82
If need to make a correction to be done within 3 months and £41
Name the benefits of LPA
You can choose the decisions you want to be made on their behalf, if they lose capacity
choose the people you want to make the decisions
how they want the people to make the decisions
Name duties of a LPA (7)
Make decisions in best interst of donor
only make authorised decisions
consult with donor prior to action where possilbe and others who may have an interst in the donors affairs
keep own money seperate
confidential
no conflict of interest
What are the extra duties under an EPA (exp Oct 2007)
act in the best interests and consider their needs and wishes as far as possible
not taking advantage of the donors position to gain any benefit
keep donors money seperate
Explain when POAs can make gifts (LPA/FPA/EPA_
on customary occasions (ie birthdays)
charities they may have donated to previously
to provide for the donees needs (ie buy clothes for them)
IHT gifts if specifically worded
What are the main bodies for the MCA 2005 (1/10/7)
court of protection
office of public guardian
independent mental capacity advocate (imca)
Name 5 key principles of MCA
- Every adult has the right to make their own decisions and must be assumed they have capacity unless otherwise proven
- An individual must be supported and given reasonable help to make own decisions before they are treated as unable to do so
- An individual must not be treated as lacking capacity simply because they make an unwise decision - can make crazy decisions!
- Everything done for someone who lacks capacity must be done in their best interest
- where decision made for another the ‘least restricitive option’ must be followed. The decision maker must make sure they interfere less with rights and freedom
mental capacity act 5 principles
Mental Capacity Act 2005
The Principles
Assumptions – One should never assume that someone lacks mental capacity.
Rights – One should take the least restrictive option with an individual who lacks mental capacity so that they maintain their basic human right of access to freedom.
Unwise decisions – An unwise decision does not constitute someone having lost their mental capacity.
Best interests – You must always act in the best interests of the individual.
Support – It is essential that a person who lacks mental capacity is given the necessary support they need to assist them with decision making.
Mental Capacity Act 2005
The Principles
Assumptions – One should never assume that someone lacks mental capacity.
Rights – One should take the least restrictive option with an individual who lacks mental capacity so that they maintain their basic human right of access to freedom.
Unwise decisions – An unwise decision does not constitute someone having lost their mental capacity.
Best interests – You must always act in the best interests of the individual.
Support – It is essential that a person who lacks mental capacity is given the necessary support they need to assist them with decision making.
How to determine if someone lacks mental capacity
The easiest way of remembering this is to think of the past, the present, and the future.
Does the individual have all of the information that they require in order to make the decision?
Does the individual understand why they need to make a decision?
Does the person understand the consequences of making the decision.
Can the person communicate clearly their decision?
what are the functions of the Office of Public Guardian
The OPG regulates and supervises Court appointed Deputies.
Its main functions include:
Registering LPAs
Keeping a record of court appointed deputies
Supervising deputies
Liaising with social services
Handling complaints
Provides reports the Court of Protection is it suspects that a Deputy is abusing his position.
How do you establish a Lasting Power of Attorney
For a Lasting Power of Attorney to be valid there are some requirements that must be adhered to:
The Donor or Attorney must be aged 18 or over
They must not be bankrupt
They must not lack mental capacity.
The LPA must be made in the prescribed form.
It must be signed by the donor.
It must be signed by an independent witness.
It must be signed by a certificate provider.
The Power of Attorney must not have been made under undue pressure and the Donor must have an understanding of the powers that they are giving away.
This must then be registered with the Office of the Public Guardian (OPG).
This will cost a fee of £82 per LPA (either Health and Welfare or Property and Financial Affairs).
The process can take 8-10 weeks.
They are not effective until registered.
Health and Welfare can not be used unless the Donor has lost mental capacity whereas the Property and Financial Affairs PoA can be used immediately.
duties of an attorney ?
Best Interests of the Donor must be adhered to.
Authority to make decisions must be established in the LPA. The Attorney does not have the authority to make decisions that are not prescribed.
Separation of the Donor’s funds and the Attorney’s funds is essential.
Interests, or conflicts of, should be avoided at all costs.
Consult with the Donor relating to decisions made on their behalf.
What is a Personal Representative
A person who has been issued with a grant to administer a deceased person’sestate. In practice, the term is commonly used in the broader sense of a person who is entitled to apply for a grant and administer the estate.
If there is awillthat names the personal representative, they are known as theexecutor(sometimes called anexecutrix, if a woman).
If there is no will (or if there is no executor named in the will, or if the executor is unable or unwilling to act), the Administration of Estates Act 1925 sets out who can apply to court to be the personal representative (usually a close relative of the deceased). The personal representative is in this case known as theadministrator.
What are the duties of a Personal Representative
Value the estate
Complete an IHT Account with HMRC (IHT100 form)
They pay outstanding tax
Outstanding liabilities such as a mortgage
They value any gifts made within the previous 7 years
They take account of any Gifts with Reservation that have been made.
They pay any IHT due on the estate
Then they apply for the Grant of Probate
This will then allow them to distribute the estate
Important Note
Inheritance tax is due 6 months after the month in which the Testator died.
Probate can not be granted, and the estate can not be administered until the value of the IHT liability has been paid in full.
The Trustee Act (2000)
It is important to distinguish the duties of a Trustee in general, and the duties of a Trustee when exercising their discretion over the investment of Trust property.
The overarching duty of a Trustee is to keep the Trust Deed safe.
A Trustee must use care, skill, and diligence when administering trust assets.
A Trustee must avoid conflicts of interest when performing trustee duties.
A Trustee must comply with the Trust Deed.
A Trustee must seek professional advice in relation to administering the Trust.
A Trustee must keep accounts of Trust assets and provide these to the Beneficiaries (if they are so entitled).
A Trustee must not benefit from the Beneficiaries of a Trust.
A Trustee must treat beneficiaries fairly and not exercise favouritism over any one beneficiary.
Trustees must act unanimously.
A Trustee must complete a tax return for the trust – Importantly, remember that all trustees are jointly and severally liable for the tax of the trust, however, it is only one trustee that is elected to deal with HMRC in relation to these matters.
A Trustee must ensure that the assets of the trust are controlled and insured.
Trustee Duties
Duty ofCare (4)
A Trustee must use care, skill, and diligence when administering trust assets.
A Trustee must avoid conflicts of interest when performing trustee duties.
A Trustee must comply with the Trust Deed.
A Trustee must seek professional advice in relation to administering the Trust.
A Trustee must keep accounts of Trust assets and provide these to the Beneficiaries (if they are so entitled).
A Trustee must not benefit from the Beneficiaries of a Trust.
A Trustee must treat beneficiaries fairly and not exercise favouritism over any one beneficiary.
Trustees must act unanimously.
A Trustee must complete a tax return for the trust – Importantly, remember that all trustees are jointly and severally liable for the tax of the trust, however, it is only one trustee that is elected to deal with HMRC in relation to these matters.
A Trustee must ensure that the assets of the trust are controlled and insured.
Trustee Duty - General power of investment
Section 3 – General Power of Investment
This subsection of the act stipulates that a trustee should act with the investment as if it were his own money, and as if he were absolutely entitled to the trust assets.
Trustee Duty - Standard Investment Criteria
The section insists that:
The Trustee reviews the investments from time to time to ensure that they remain appropriate to the trust deed and needs of the beneficiaries.
He should consider the need for diversification of the investments.
He should not invest in risky or speculative investments to maximise potential returns on the trust fund assets.
Trustee Duty - Advice
The Trustee, before exercising any power of investment, whether arising under this Part or otherwise must obtain and consider proper advice about the way in which, having regard to the standard investment criteria, this power should be exercised.
Professional advice must be sought before exercising his power of investment.
The advice must be sought from a professional who the trustee believes to be proficient in the matters concerned.
Trustee Duty - Restriction on investment
This section makes clear that the powers of investment are limited should the Trust deed make clear that a specific investment is prohibited.
The Types of Trust
Remember this with by thinking that there are many different Species of Trusts.
Successive Trusts
A successive trust is where property is held on trust for a succession of interests. For example, an Interest in Possession Trust is a successive trust as when the life tenant dies, then remaindermen keep the successive right to the capital.
Presumptive Trusts
A presumptive trust is where one person purchases property in the name of another. That person is then deemed to be holding the property on trust.
Purpose Trusts
A purpose trust is a trust that is not intended for a beneficiary but rather, the assets in the trust hold a purpose, for example, the House Trust has the function of providing funds for maintenance and upkeep of the house.
Express Trusts
An express trust is created expressly and is usually created in a written method such as a deed. It is called express because the terms of the deed are expressly set out and there should not be any uncertainty about the wording, the subject, and the objects of the trust.
Constructive Trusts
Constructive trusts are created under institutional law. They are formed from the breach of trust rather than by the Courts. An example of a constructive trust would be where Person A sends Person B £1,000,000 by mistake. Person B then holds £1,000,000 on Constructive Trust for the benefit of the owner of the money, Person A in this scenario.
Implied Trusts
An implied trust is implied through the actions of the parties involved. For example, a business partner buys a property for the business. The Business Partner who completed the transaction would be considered to hold the property on trust for all of the partners of the business, even if there is nothing expressly written down.
E is just here to finish the word
The final trust to mention is a Resulting Trusts
Quite simply, this kind of trust is where there is no longer a purpose for the assets that were originally placed into trust. For example, ‘I leave my fortune to my wife’, however, should the wife die, a resulting trust would be created in line with the laws of the Will or Intestacy, and the funds would naturally pass to the children of the deceased (if suggested in the Will) or however the individual choose.
Bankruptcy
The Process from the beginning
There is a petitioner who is usually a creditor must prove that the individual owes in excess of £5,000 in a unsecured debt.
A debtor can do this against themselves if Creditors are harassing for payment.
Until 2016 this was done at the court however now it is all done online.
The debtor must prove that they are unable to pay the debts.
Following this the Court will make a Bankruptcy Order against the debtor.
Bankruptcy - process once Bankruptcy order issued
What happens next
The Official Receiver will usually call a meeting of the creditors.
Only 10% of the creditors need to agree to this for a meeting to be called. (The % is calculated by money owed).
At this meeting the Official Receiver will appoint a Trustee in Bankruptcy. If there is no meeting held then the OR will become the TIB. Their function is to realise and distribute the assets of the Bankrupt to settle their debts with the creditors.
Bankruptcy and property
The TIB is unable to take:
Books, tools, etc. used for the business of the Bankrupt
Clothes, furniture, sanitary items that allow the Bankrupt to provide the basic domestic needs of his or her family.
Property held on trust by the Bankrupt for the benefit of another person.
Bankruptcy and Income
The TIB will probably apply for an Income Payment Order (IPO). This must specify by sum or percentage proportion of income that is payable to the TIB in order to release to the creditors.
The period of payments must be set out in the agreement at the outset and can not be changed. This can not last for more than three years, and the Bankrupt is bound to this, even if they are discharged from the Bankruptcy before this point.
Bankruptcy and the home
If the Bankrupt lives by themselves, with a cohabitee, or with Adult children, then their share of the property will pass to the TIB for them to make an order of sale. Although the bankruptcy will usually last for about 12 months, the TIB has up to three years to make a charge on the home for sale. After
the three year period, the home is automatically reverted to the Bankrupt.
Where there is a shared interest in the property, i.e. if it is owned on a joint tenancy basis with a partner, then the TIB will make an application to sever the tenancy and claim their half of the home. However, this application will be made before the Courts and as a result the Court will consider the following:
The interests of the Creditors
The needs and resources of the spouse
The needs of any resident children
Whether the spouse’s conduct contributed to the bankruptcy.
There is generally a three year limit in which you can deal with the sale of a home in bankruptcy proceedings. If you have concealed property from the TIB then the three years start from the date they became aware of the property. This limit can be extended by a court order.
Bankruptcy and order of repayment
First and foremost the TIB is compensated out of realised assets.
Then employees wages and pension contributions (up to a limit of £800 to be secured) anything above the £800 becomes an unsecured debt. The employees are also entitled to holiday payments which do not have a cap.
Then secured creditors.
Unsecured creditors.
Interest due on debts since the bankruptcy petition was taken out
And finally, any debts to relatives/spouse comes at the end.
Bankruptcy - what are the 4 main restrictions
Do not trade under any name except that which you were made bankrupt under.
Do not accept credit in excess of £500 without informing the individual/corporation you are bankrupt.
Do not act as a director during your bankruptcy.
Do not act as an insolvency practitioner during the bankruptcy.
Bankruptcy and restrictions on property
Do not conceal property from the TIB
Do not destroy property in order to defraud the TIB.
Do not provide false information to the TIB.
Do not dispose of property in order to defraud creditors.
Do not preference one creditor over others.
Do not leave the country with your property.
Bankruptcy and - disposal of assets at an undervalue
here is a Less than 2, 2 to 5, and in excess of 5 rule to remember when considering whether an application to have a payment set out would be successful in court. This includes pension contributions and gifts/payments.
If under 2 years, then the TIB would not need to prove that the Bankrupt was insolvent at the time of the transaction in order to have the payment set aside.
Between 2 to 5 then the TIB would have to prove beyond reasonable doubt that the bankrupt was insolvent at the time of the transaction.
In excess of 5 years, then there is very little chance that any transaction would be set aside by the court.
Disposal of assets at an undervalue into Trust.
This is the same as the above, however it is important to remember the one small change in the rules.
If a settlement was made between 2-5 years of being declared bankrupt, then the liability to prove solvency, not insolvency, is on the Trustees and they must prove beyond reasonable doubt that the Settlor was solvent at the time of the transaction.
All other rulings are the same.
In all of the above, proving without reasonable doubt means that it must be evidenced that the transaction/settlement was not carried out with the intention to prejudice creditors in any way.
Bankruptcy and Pensions
Pensions
All pensions are safe from the TIB. All except unregistered pensions (EFURBS). The TIB can claim an unregistered pension scheme proceeds. See Raithatha v Williams and Horton v Henry.
Income being drawn from a pension can be included in the IPO however, a TIB can not force a bankrupt to take pension benefits in order to repay creditors. Therefore, PCLS can not be forced on someone with the intention of paying outstanding debts.
What is the role of the IMCA
Appointed to support someone who lacks capacity and has no one to speak on their behalf
Represent someone about their wishes, feeling beliefs and values.
Can challenge decision makes
NHS and local authorisites must discuss
Challend decisions mage by an attorney or deputy appointed by court
Mental Health Act -
Compulsory Admission for assessment in hospital
Can be detained for a max of 28 days - can be detained for a further 28 days if necessary
approved medial practioner or nearest relative must act for someone to be section
2 drs must then recommend a section
1 dr must have experience in working withs mental illness
Drs must assess eithin 5 days or each other within 14 day of section request
Mental health act
Compulsory admission for treatment in hospital
can be detained for up to 6 months, a further 6 months then 1 year
same process as assessment
What is guardianship
Can make limited decisions on a persons behalf
made in persons best interest
not financial decisions
Make sure the person
lives in a specified plan
attend specified places for medical treatment, occupation education or training
access to a Dr,
What are the differences in Trustees exercising duties and discretion
duties - bound by statutory duty of care, must use utmost diligence to avoid any loss
discretion - act in good faith, act with diligence as they would your own affairs,
In relation to the activities of the trustees in administering trust property state what beneficiaries are entitled to
see accounts
all reasonable information relating to transactions of property
Mother is worred about spendthrift son, what types of trust could be used and how these could help her in ensuring son doesnt squander her estate
Discretionary or Power of Appointment Trust
The trusts are flexible
The trustees have power of appointment
Gives them the power to vary beneficiaries interests within limits
Can be used to cater for changing circumstances
Son can be a potential beneficiary
He cannot benefit until trustees deem appropriate
Describe the features of a fully secret and half secret trust
Fully secret - does not appear in the till
Half secret will appear but not the terms/details
What conditions must be satisfied for a court to declare a fully secret trust?
The testator must communicate that property is subject to secret trust under the will to the apparant legatee
the communication can be made at any time in the testators lifetime
all the terms of the trust must be fully communicated (in the form of a sealed letter)
the testator must communicate a legally biunding obligation on the legatt and the legatee must accept the fullt secret turst
When myst a half secret tust be communicated to the legatee
The testator must comminicate before the will is executed
List and explain the three certainites to make a trust valid
Subject - must be certain - property specified
Object - beneficiaries by name or class
Words - show that the trust was intended
Name the act that governs the purposes of a charitable trust to be set up
Charities Act 2011
name 5 categories of charitable trust
prevention or relief of poverty
advancement of education, religion, health, saving lifes
citizenship., arts, culture, amateur sport, human rights, environmental
The relief of those in need
pro,otion of the efficient of armed force, policy, fire and rescue, ambulance
state who and what the mental capacity action 2005 governs and list the principles
The act governs
- decision making on behalf of those who lose mental capacity at some point (or from birth)
- Decisions on personal welfare and financial matters
- best interest of individual
- Assume you have capacity unless otherwise proven
2, must be supported to make own decisions - not treated as lacking capacity because they make an unwise decision
- everything done must be done for their best interest
- ‘least restrictivie’ option should be followed
list the duties of an executor (6)
Determine assets and liabilities
collect assets and pay any debts
obtain GOP
Pay IHT
Complete accounts
distribute assets as per will
explain how tax due on an estate is calculated and paid
Collate all assets, liabilities and any gifts made in last 7 years
detial and RNRN NRB / Carried out
HRMC will calculate
tax must be paid prior to probate
What property must a bankrupt declare and when by
anything received between adjudication and discharge
what happens to property when discharge has been completed
must be assigned back by TIB
How are trustees assessed for liablity to income tax?
Must complete SA
Make interim payments on account based on previous tax year
interim payment - 31/01 in the year of assessment and 31/7 in the year following
final balancing payment made on 31/1 following tax year along with any CGT
All trustees are jointly and severally liable
unpaid tax can be recovered from any of the trustess
penalties can also be uncurred
How is a gift paid into an IIP Trust treated for IHT purposes
Treated as a CLT
if below NRB no immediate tax charge (or 20%/25% if above NRB)
Trust outside of settlors estate (after 7 years)
how does a 18-25 trust work
Set up for minors under intestacy or criminal injuries comp scheme
absolute interest given at age 25
Beneficiary treated as owning the assets for iht until they are 18
exit charge payable based on the time between 18th and when they receive the absolute interest
What is the difference between setting up a pension under master trust and under a deed poll ?
Master Trust
Provider is trustt
pension provider holds underlying investments and manages the arrangement
the individual is given a memebership doc
Deed Poll
Pension provider executes a deed setting up scheme
deed delares that it will adhere to the legislative requirements
deed delares that is will only make payments for approved purposes
individual policies are issued to clients
How do you set up a typical loan trust
Settlor sets up discretionary trust
settlor makes an interest free, repayable cash loan to trustess
trustess invest in a bond
settlor usually trustess
loan is repaid unter the 5% facility
can demand repayment of loan at any time
What are the advantages and disadvantages of a loan trust
Adv
Growth outside of estate for IHT
access to cash via repayment of loan
income
flexible
Disadv
Loan remains in estate for IHT
Max 20 years of 5%
long term iht planning
List 10 events that can lead to a trust review
Death (Trustee 0r beneficiary)
Serious illnees (T or B)
Bankruptcy of settlor, T or B
marriage
seperation
divorce
changes in income and wealth
disputes between S, T or B
legislative changes
economic change
tax changes
Explain the following in relation to the beneficiaries of the trust:
Absolute interest
life interest
remainderman
contingent beneficiary
Absolute - full entitlement and cannot be taken away
Life Interest - entitled to the income from the trust for life, cannot touch capital of trust, - aka life tenant
Remainderman - beneficiaires who the trust property passes after death of life tenan, until death they have reversionary interest (future)
Contingent - interest depends on the happening of a certain event
Explain the difference on how a jointly owned property can be held
Joint tenancy - identical and equal interest, property passes to survivor, cannot be distributed by will etc, severed if one becomes bankrupt
Tenancy in common - their share passes to estate, distributed via will
What does a deed of severance do ?
Converts joint tenancy to a tenancy i common
What are the consequences of breach of trust
Take legal action
Court can issue an injunction preventing transaction
ordeer the trustees to make restitution
return of any property wrongly transferred
State the types of trust which allow beneficiaries to be varied
Power of appointment
discretionary (within prescribed class)
State the requirement for a LPA to be valid
Donor and POA - 18+
They have read and understood the prescribed info and duties
Certificate from prescribed person confirming donor understands
What events can revoke a POA/LPA
- Donor end the LPA if he has capacity
- bankruprcyy of Donor
death of POA
bankruptcy of POA
Incapacity of POA
When does a LPA come in force
registered with OPG
loses capacity
What is a ‘qualifying advance decision’
Donor can specift limitations on the POA actions
Name 7 points for a disclaimer to work
mustnt have accepted property
must disclaim the property
must be in writing
made within 2 years
no consideration for money or money’s worth
must be in writing that disclaimer to have the effect as if not received
the property is treated as not being received
State teh advantage of being a secured creditor
Can enforce security to repay the debt
if sufficient they receive repayment before bankruptcy proceedings
if security isnt sufficient they will be first in line
Explain how you deal with trustee expenses
No tax relief on trustee expenses
they are deductible
Trust expenses are set against income in following order
1. dividends
2. foreign dividends
3. savings income
4. other income
Complete a R185
give a definition of a constructive trust
Imposed by lawa regardless of intestions or presumed intentions
What is CGT rate for discretionary trusts/life interest and interest in possession trusts
20% or 28% consider if have PRR
What is the tax treatment if trust transfers assets to a beneficiary
Transfer is treated as a disposal subject to holdover relief
Explain Holdover Relief
The trustee acquires the asssets at settlors base cost - you must apply for it and the gain is transferred to the trust/beneficiary when they sell it
What is CGT rate for discretionary trusts
half of allowance divided by number of trusts (disabled trust have full allowance)
How are gains taxed with offshore trusts
UK dom - liable to CGT if has an interest in the trust
Name three trusts that transfers into are classed as PETs for IHT
Bare
Diabled
Life interest &FLexible interest in possession trust (pre Mar 206
Explain exit charges on CLT and when they happer
if capital distributed in first 10 years
30% of the ?/40 is charged
If after 10 years it is the periodic% / 40
Explain periodic charge and how this is calculated
at 10 year anniversary
max is 6% (ie 30%*20%) every 10 years
Value of fund at 10 yr minus NRB = $
$ x 30% x 20% -= £
£ divided by value (times 100) = periodic charge
Explain an exit charge after 10 years how calculated
Work out number of quarters since 10 year
Use periodic charge figure calc at 10 year
Amount taken out x no of Q / 40 x periodic rate = Exit charge
how do you work out exit charge for an 18/25 trust
same but use quarters since 18th birthday
Explain tax charge of an A&M trust
can retain its IHT planning if capital passed at 18 as per trust deed
if at age 25 - if trust not amended then exist charge will be applied (18-25)
If after 25 then exit charges will apply
Charge based on quarters since April 2008 to 10 year anniversary
detail GWR and POAT
Gifts –> charged at rental income or market value
POAT - income tax on annual value
Detail chargeable event on a life policies in trust -
Death
Maturity
Part surrender
- assignment is not a chargeable event
Who will pay tax on chargeable event (in trust)
Assessed against income
If settlor alive or died in the same tax year as the event - settlor (who will have top slicing)
Trustees if tax year after the one the UK resident settlor died or immediately before settlor is non uk
Trust do not have top slicing
Standard Rate band applies then 45% trustee rate
If no UK trustee - but uk based beneficiary- beneficiary will be taxed but as trustee income not capital
