Whether you’ve recently been asked if you can be a trustee for a friend or family member’s trust, or you’ve been a trustee for some time and you want to brush up on what your responsibilities to the trust are, this article will answer all (and any) questions you may have.
In the simplest possible terms, a trust is a method of organising money, investments, land, or buildings (known collectively as assets) for a person or group of people. There are three types of people involved in a trust: the settlor, the trustee, and the beneficiary. The settlor is the person(s) who place the assets into a trust. The beneficiary (or beneficiaries) is the aforementioned person or group of people who benefit from the assets over time, and the trustee…
As a trustee you will be expected to manage the trust in the best interests of the beneficiary or beneficiaries. In the words of the Money Advice Service:
“As a trustee, you’re responsible for using the money or assets in a trust to benefit someone else. You won’t be able to benefit from the trust yourself (unless the trust agreement says you can). What you can and can’t do may be set out in detail in the trust document.”
Trustees hold the sole responsibility for reporting and paying tax on behalf of the trust. If there is more than one trustee (you’re not the only trustee for your specific trust), one of you must be nominated the ‘principal acting trustee’ and manage the trust’s tax affairs by yourself.
Assuming you’re the only trustee, or you’re nominated the principal acting trustee, you are required to register the trust with HM Revenue and Customs (HMRC) by 5 October of the tax year after the trust is set up. To do this you’ll need to complete form 41G and send it to HMRC’s trust and estates department.
Once the trust is registered you’ll be required to send HMRC an annual Self Assessment tax return regarding the trust’s income and any gains.
As a trustee you are also expected to report to the trust’s beneficiary or beneficiaries on what tax has been paid and what income has been created whenever they ask for this information.
If the beneficiary is a close friend or family member they will, fingers crossed, not be asking you for this information every few weeks. But as and when they do ask for this information you will be required to complete form R185, or form R185 (Settlor) if you need to report this information to a settlor who has an interest in the trust.
Experienced Trust Accountants
To speak with a professional accountant to discuss your responsibilities as a trustee, or for anything else, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.