07.12.23

Choosing your Trustees

When setting up any type of Trust, one of the most important factors to consider is who you wish to appoint as your Trustees. Your Trustees will be custodians of the Trust assets and responsible for all aspects of Trust administration, such as record-keeping, ongoing matters of tax compliance, investment of the trust assets, and making distributions to beneficiaries.

Individual Trustees must be over 18 years of age, and from a practical perspective, it is preferable that your Trustees are UK resident. Where you wish to appoint individual Trustees, at least two must be appointed, unless you wish to appoint a Corporate Trustee such as Renaissance Trust, which, as a trust corporation, has the capacity to act as sole Trustee if desired.

Appointing the most suitable and qualified Trustees is pivotal when setting up a Disabled Person’s Trust to ensure that the Trust continues to protect the interests of the vulnerable person on an ongoing basis. Appointing a Trust Corporation such as Renaissance Trust ensures that all aspects of compliance are met and that the Trust is managed most effectively by experienced professionals.

A higher standard of care

Being a Trustee carries great responsibility. Trustees are bound by numerous statutory obligations and duties of care contained in the Trustee Acts of 1925 and 2000, as well as those contained in the Trust deed itself. Any mistakes made by the Trustees may mean that Trust could become liable to pay penalties or fines. Trustees can sometimes be held personally liable for failure to adhere to their duties. Corporate Trustees must adhere to a higher duty of care.

Expertise

Appointing a Corporate Trustee ensures that the Trust’s administrative requirements are professionally managed, including the keeping of the necessary Trust records and maintaining the required details on the trust register. All taxation matters are competently managed including the submission of the required self-assessment tax returns, assessing the inheritance tax position and reporting to HMRC when required. Assistance can also be given with beneficiaries’ personal tax position and how they report trust income to HMRC.

Disabled Person’s Trusts are unique in their nature. When managed effectively, they can provide advantageous tax treatment compared to Discretionary Trusts, which pay income tax at the rate applicable to trusts, which is currently at 45%. The Trustees would need to consider the needs of the vulnerable beneficiary and their needs, and consider making a Vulnerable Person’s Election to HMRC, also commonly referred to as a VPE1, to access this preferential tax treatment. The Trustees must consider whether this is appropriate, and if so, the Election must be made within a certain timeframe. If accepted, the Trust income is taxed at the vulnerable person’s personal rate of tax, which is often 20%. The team at Renaissance Trust routinely make Vulnerable Person’s Elections to HMRC and have an extensive understanding of the implications of making this election.

Crucially, many vulnerable beneficiaries of Disabled Person’s Trusts may be in receipt of means-tested benefits to cover their daily expenditure. When utilised correctly by the Trustees, the Trust can provide for things such as specialist equipment and holidays which the Beneficiary’s income is unlikely to cover. However, if not managed correctly, distributions may be seen as income, and therefore could result in cuts to means-tested benefits. The Trustees must be confident that they understand the implications of making any distributions and how they are made. Renaissance Trust routinely act as Trustee of Trusts where the vulnerable beneficiary is in receipt of means-tested benefits. We work closely with the Benefits Advisors at our sister company Renaissance Legal who provide expert advice to ensure that we remain compliant, and the maximum benefits are received.

Future-proofing the Trust

When appointing individual Trustees such as family members or individual professionals, an obvious consideration is that individuals can become incapable of acting, get ill or die. This does not apply to a trust corporation such as Renaissance Trust, relieving family members of the burden of finding replacement Trustees.

Further, it is an unfortunate reality that family members have disagreements. A Trust Corporation will act professionally and impartially. This gives you the reassurance that there will be no potential conflict of interest or undue influence when making trustee decisions.

How can Renaissance help?

At Renaissance Trust, our team has over 35 years’ experience in the creation and management of Trusts, including Disabled Person’s Trusts. We are confident in offering the highest standard of care to all of our clients.

We can work with you to ensure the best outcomes for the vulnerable person. Some families opt to appoint us as a co-trustee, so that we can work alongside them to provide expert support and can deal with all aspects of compliance, while they can assist us in making decisions relating to their loved one. Others choose to appoint us as sole Trustee.

We can also be appointed as a Trustee in relation to a Will Trust, which comes into being on your death when assets are transferred to it.

The specialist teams at Renaissance Legal and Renaissance Trust are happy to give advice and guide you through the process to enable you to achieve the most beneficial outcome.

Contact us for a discussion about your situation.