One of our areas of expertise is setting up and administering private and charitable trusts.
Blackwood & Smith has been involved in setting up and administering private and charitable trusts for decades.
Based in Peebles we assist clients in Peeblesshire, the wider Scottish Borders area, Edinburgh and the Lothians but our reach extends to clients located throughout Scotland.
As your local legal experts we don’t think you should have to travel to get the best.
We pride ourselves in providing specialist legal advice on various different types of Trusts. We are frequently asked to provide legal advice on:
Setting up and administering trusts to formalise personal charitable giving or to establish a charity with specific charitable purposes
Setting up and administering family trusts for younger children or where there is a “blended family” following a second or third marriage. Also advising on the use of liferent trusts for protection of the family home.
The firm is also involved in aspects of trust administration, for example, registration of trusts with HMRC, tax compliance and preparation of trust tax returns and trust accounts as well as the appointment and resignation of trustees and preparation of trust minutes.
A trust is essentially a way of ring-fencing money or other assets to keep them in a separate pot. A trust is created when assets are held by a person or persons (the trustees) for the use or benefit of others (the beneficiaries). Trusts can be set up during someone’s lifetime or on their death – they are known as the settlor.
There are various forms of trust but the main types of trust which we are involved in are:
Historically such trusts were used to hold assets for women and underage children when men went to war because women could not hold assets in their own name. These days liferent trusts are commonly used where “blended families” are involved, e.g. on second or third marriages. A person may wish to safeguard the inheritance of their children from their first marriage in the event of a second marriage while still making provision for the second spouse. Alternatively, they may wish to provide for an adult child who is unable to hold assets themselves perhaps because of mental or physical incapacity; addiction or inability to manage money. Liferent trusts are also used to protect the family home or other assets from potential care costs.
These are very flexible trusts and might be used where there are multiple beneficiaries with potentially diverse needs not necessarily quantifiable when the trust is established or where the person setting up the trust is undecided as to how they wish their estate to be divided. Income can be distributed or accumulated. Capital can be advanced or retained.
Usually, a class of potential beneficiaries is named – some may benefit, and some may not – it is for the trustees to decide who gets what and when. The trustees will be guided by the settlor as to what their intentions are.
There are some specific types of trust used for children to cover the possibility of their parents dying unexpectedly and where assets need to be invested until the children are old enough to inherit. More benign tax rules apply to those.
Charitable trusts enable assets to be used for defined charitable purposes such as relief of poverty; advancement of education or religion; advancement of the arts, culture or science. These trusts have to satisfy strict criteria but will then secure tax advantages which are not available to other trusts. Not all charities are established as trusts and can be constituted in other ways.
Until now trust law has been in part regulated by statute some of which is over 100 years old and does not reflect modern trust practice. The relevant Trust provisions of the Act came into force on 26th June 2024.
There are new provisions intended to remove archaic restrictions of accumulation of trust income. There are also detailed provisions about removal of trustees who cannot be traced or who do not communicate. Previously this would involve an expensive court action. The duties of trustees are also to be formalised – previously this was largely a matter of common law and trustees’ powers will also be updated and revised. There are new rules allowing for variation of trusts whose purposes are outdated or no longer appropriate where circumstances have changed since the trust was set up. All of this is to be welcomed.
Our team genuinely cares about each of our clients. We understand that communication is key and we will be on hand to answer your questions. Our solicitors will know you by name and will be up to date with the status of your file. We are on hand and happy to answer your questions in a friendly and prompt manner throughout the transaction.
For most people dealing with Trusts is not something that is done every day. It is quite normal to have lots of questions about the process or the legal terms used during the transaction. We completely understand that the information you receive during the process might be new to you so please always feel free to ask us to explain something in more detail. Our solicitors have put together answers to some questions that frequently come up during the course of a Purchase of Sale transaction.
While this is possible, it is seldom a good idea as there are tax disadvantages for the settlor in doing so. If there is likelihood of needing assets from the trust, other options should be explored.
There is no restriction on the number of trustees appointed. Trustees should be trustworthy and have a good appreciation of what the settlor is seeking to achieve. A beneficiary can also be a trustee but that will depend on the type of trust and it is better for trustees to be independent. The settlor of the trust can be a trustee but this is not always advisable.
At present this would involve a costly court process but under the provisions of the Trusts and Succession (Scotland) Act 2024 a simplified procedure for removal of a trustee who is untraceable or not communicating and the appointment of a replacement is being introduced.
In Scotland it is not necessary to stipulate a set period for the duration of a trust unless it is a specific type of trust – for example to hold funds for a child until they reach 25. Trusts can be open-ended and sometimes family trusts will continue for generations.
You could consider using a trust to hold their share of your estate – either an interest in possession trust giving them the right use the assets without having control over them, or a discretionary trust allowing them restricted access to income or capital at the discretion of the trustees.
