When it comes to trusts and estates, navigating the intricacies of registration can be a daunting task. Understanding the rules and deadlines is crucial to ensure compliance and avoid potential penalties. In this insight, we delve into a number of the key issues to simplify this often complex area.
Importance of timely registration
Trusts should typically be registered within 90 days of establishment, with few exceptions. Agents handling trusts must ensure they obtain a certificate of registration or a letter confirming the unique registration number (URN). Failure to register within the specified timeframe can result in penalties of up to £5,000, though these penalties are primarily applicable in cases of deliberate non-compliance.
Trusts in estate administration
During the administration of an estate, any trusts created must be registered within two years of the date of death if they remain unresolved within that period. While this timeframe is widely recognised among probate practitioners, lesser known is the scenario where a Deed of Variation (DOV) establishes a trust, such as a discretionary trust for specific beneficiaries. In such cases, the 90-day registration rule still applies, adding a layer of complexity to the process.
Potential for multiple trusts
A common oversight occurs when a Will appoints individuals as both executors and trustees. If the Will also stipulates that the residuary estate is held on trust for certain beneficiaries, it may inadvertently create a second registerable trust if the estate remains undistributed beyond two years of death. Careful consideration of wording in the Will is essential to avoid unintended trust creation.
Drafting considerations
When drafting or advising on Will creation, it’s advisable to appoint executors separately from trustees, unless specific trusts necessitate trustee appointments. This approach offers flexibility and clarity in the administration of trusts outlined in the Will.
Property and trust registration
A unique registration challenge arises when property held as Tenants in Common becomes subject to a life interest trust established by the deceased’s Will. In such cases, the executor/trustee isn’t the beneficial owner of the deceased’s share, potentially creating two separate trusts in the eyes of HM Revenue & Customs.
Proposed improvements
The landscape of trust registration may soon see improvements, as the government’s consultation paper on Money Laundering Regulations published in February 2024 suggests extending the registration window for trusts created by death or Deed of Variation to two years. Such a change would align with trusts established directly in a Will, offering greater clarity and consistency in registration requirements.
Our advice….always seek advice!
Dealing with estates and trusts involves navigating a complex terrain of registration requirements and deadlines. Executors and trustees must remain vigilant, continually assessing the need for registration and the potential creation of additional trusts. Understanding the nuances of trust registration and staying informed of proposed regulatory changes is no mean feat, and we would always advise that you seek professional support and guidance in order to effectively manage any responsibilities relating to trusts.
The next step
If you have any enquiries regarding the above, or If you would like to find out more about the services for executors that we can provide, please contact Peter Tuffin at p.tuffin@uhy-uk.com or one of our private client specialists at your nearest location.
