Taxation of Trusts and Estates

Expert advice and support with tax planning and Trusts

Expert advice and support with tax planning and Trusts

Taxation of Trusts and estates - What should you consider?

Each type of Trust is managed differently and can be subject to different tax regimes so it is important to consider at the outset the right Trust to cover the particular objectives of the settlor.

At Goughs Solicitors, we have a wealth of experience in supporting Trusts and estates, assisting with all aspects of administration, structure, preparation of accounts and tax returns. 

How can a solicitor help you with the
taxation of Trusts and estates?

Tax and Trust law can be very complicated and differ between Trust types so it’s vital to obtain advice from a specialist who will explain all of the options available to legally reduce your tax liability. 

At Goughs we offer specialist advice in relation to all areas of tax planning and Trusts allowing us to provide tailored advice to your specific requirements.

Protect your wealth with efficient tax planning

Your specialists in taxation of trusts and estates

Popular questions
about taxation of Trusts and estates

The Settlor

Decides how the assets in the Trust assets should be managed. This is set out in a Trust Deed. The Trust Deed will usually appoint the Trustees, specify the beneficiaries and specify who, when and how much they can benefit. This is usually quite an in-depth document and it would be advisable to have this drawn up professionally as it will govern the Trust throughout the lifetime of the Trust.

The Trustee
The Trustees in effect “own” the Trust assets. Their role is to manage the assets in accordance with the Trust Deed. This will usually involve dealing with the day to day management of the assets, declaring and paying any tax due on the Trust, dealing with the investment of the Trust assets, accounting to the beneficiaries and sometimes using their discretion to decide how best to manage the Trust (if this is provided for in the Trust Deed).

The Beneficiaries
The beneficiaries benefit from the Trust under the terms of the deed or at the Trustees discretion. They may receive the income of the Trust, or the capital or both.

Income Tax
For a Bare Trust the beneficiary is responsible for paying the income tax. For all other types of Trust the Trustees are responsible. Trustees are responsible for paying tax on the income received by a Trust at the specific rate applying to Trusts. Sometimes the Trustees might “mandate” all the income to a specific beneficiary meaning the beneficiary in that scenario would be responsible for the income tax.

Capital Gains Tax
Capital Gains Tax (“CGT”) might be payable by the settlor on setting up a Trust if the settlor is transferring or selling an asset to the trust which has gained in value since the settlor acquired it. This is an important factor to consider when setting up a Trust.
CGT can also be payable when an asset leaves a Trust or is sold within a Trust. It would be the responsibility of the Trustees to declare and settle any CGT payable on the Trust. They would only have to pay CGT if the gain exceeds their annual allowance (currently half the individual allowance or a full allowance if the Trust qualifies for special tax treatment – usually if it is set up for a vulnerable beneficiary).

Inheritance Tax
Inheritance Tax (“IHT”) might also be payable by the settlor when setting up a Trust depending on whether any exemptions apply. IHT may also be payable by the Trustees when the Trust reaches its 10 year anniversary. The calculation can be quite complicated but, in very general terms, the amount that is charged to tax is based on the value of the Trust fund immediately before the 10 year anniversary. IHT may also be payable by the Trustees when assets leave the Trust or the Trust ends (exit charges). IHT is payable on “relevant property” such as houses, shares, money – this includes the assets in most Trusts.

Creating a Trust is an important matter and has lasting legal and tax consequences. The Trust, once created, is irrevocable and the Trust assets must be held according to the terms of the Trust. The Trustees will be in control of the operation of the Trust.

*The above information applies for the tax year 2020-21

Our tax planning and Trusts solicitors offer a full range of services for tax planning, Trust creation and Trust management. 

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Thank you Alice Blackmore for your fantastic professional support, with care, compassion and kindness, of our need for explanation and understanding of the system and language in a lot of correspondence. Thank you too for being always being honest and empathic of our feelings.

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Goughs Solicitors provide a friendly, professional and extremely reassuring service. The whole team, especially Georgina Catlin, are empathetic and provide sound advice when required, you definitely feel you are in safe hands.

Your Trusts team

Annie James

Solicitor

Annie qualified as a Private Client solicitor in 2016 and joined Goughs in February 2020. She specialises in the preparation of Wills, Lasting Powers of Attorney, preparation and administration of Trusts, and the administration of Estates. Annie prides herself on taking the time to really understand the needs and priorities of her clients.

Luchia Hirst

Associate Solicitor

Luchia has been practicing Private Client law for close to 8 years, and really enjoys the client contact and hands-on nature of this area of practice.

Dawn Moir

Partner (TEP)

Dawn joined in 2003 and became a partner in 2004. Whilst Dawn supports her team with all aspects of estate planning and estate administration, her particular areas of expertise are later life planning & support, and trust creation & administration, including all things tax.

Phillip Bolton

Partner & Head of Private Wealth

Phillip is a Partner and Head of the Private Wealth Team at the firm. His practice encompasses all aspects of private client work, with a particular interest in complex Wills, wealth preservation, tax mitigation, and estate planning.

Emma Taylor

Partner & Head of Private Client

Emma began her life at Goughs in 2008 as a Solicitor. Now, with over 15 years of experience, she is a Partner and Head of the Private Client Department. Emma deals with all areas of Private Client work but has a particular interest in Trusts and Complex Property Ownership.

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