8 April 2011 by

Trusts for the Disabled, looking after vulnerable family members

Many people see trusts as a tax-saving device for the rich and irrelevant to the majority of people in the UK. In reality, trusts are much more commonplace. In its most basic form, a trust is simply an arrangement where one person (the trustee) looks after money or property on behalf of another (the beneficiary). Parents of disabled children, for example, may worry about who will care for their child after they have died, or if they become too old to do so themselves. There is also the question of money; whereas normally a parent would unhesitatingly leave money to their child, what if the child would not be able to manage that money? As a result a trust structure is often used by parents who want to ensure their disabled child is provided for after they have died or during their lifetime.

The most important part of trust planning for the disabled is understanding the beneficiary’s circumstances, so the type of trust can be tailored to their individual needs. Can the beneficiary manage their own funds, or should the trustees be completely in charge? Is the beneficiary in receipt of means-tested state benefits? What is the value of the trust fund, and how will this affect the beneficiary’s tax position? How much will it cost to administer and is the value of the fund enough to cover those costs?

The answers to those questions, among others, will determine how and when the trust should be set up. Usually, the trust will either state that the beneficiary is entitled to receive the income produced by the fund as of right, or it will state that the trustees have an absolute discretion to decide how and when the trust fund is distributed. It’s also possible to set up a hybrid trust, where the beneficiary has an absolute right to income unless he or she does something that adversely affects their interest, in which case the trustees step in and regain control.

Inevitably, tax must also be considered. The taxation of a trust fund will depend on the type of trust, who set it up and when it was set up (during lifetime or on death). Special treatment is often available if the beneficiary is disabled, however the rules are frustratingly inconsistent. A beneficiary considered disabled for inheritance tax purposes, and so entitled to tax relief, may not be considered disabled for capital gains tax or income tax purposes.

All of the above adds up to a potential minefield for what should arguably be a simple matter.

Please contact Iain Aitken with any queries on trusts.

5 April 2011 by Sarah Davies

Referral Fees

For several years now, some solicitors have tried to maintain their levels of new instructions by paying estate agents referral fees. The fee is paid to the agent, usually on the completion of a deal, as a thank you for recommending the client to the firm.

5 April 2011 by

Polygamous Marriage and Intestacy

Bigamy, as we all know, is unlawful in the UK. However, polygamous marriage is legal in several other parts of the world and the UK will recognise any marriage that lawfully took place abroad. The issue of polygamous marriage can therefore on occasion affect the operation of UK law.

Signup To Our Weekly e-News

"*" indicates required fields

We’ll never share your details with any third party in line with our privacy policy.