Interest in possession trusts are a common estate planning tool, but they do not last forever. At some point, the trust will come to an end, and trustees have crucial responsibilities to fulfil during the closure process. This article will outline the key considerations and steps involved in closing an interest in possession trust.
Please click here to find out more about our Wills, Trusts and Lasting Power of Attorney Services.
Free Initial Telephone Discussion
For a free initial discussion on how we can help you deal with the legal implications of creating a Trust, get in touch with us today. We are also experienced in dealing with all aspects of Wills and Probate and we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.
When Does an Interest in Possession Trust End?
An interest in possession trust typically ends when:
- The income beneficiary dies: This is the most common scenario. Upon the death of the income beneficiary, the trust capital usually passes to the remainderman (the person entitled to receive the trust assets after the income beneficiary’s death).
- The trust deed provides for termination: The trust deed may contain specific provisions for termination, such as after a certain period of time or upon the occurrence of a particular event.
- Court Order: In some circumstances, the court may order the termination of the trust if it is deemed to be no longer necessary or appropriate.
Key Responsibilities of Trustees During Closure
- Determine the Identity of Beneficiaries: Trustees must accurately identify all beneficiaries entitled to receive the trust assets. This may involve conducting thorough research and obtaining necessary consents.
- Gather and Distribute Trust Assets:
– Realise Assets: If necessary, trustees must realise trust assets, such as selling investments or properties.
– Distribute Assets: Once the assets have been realised, trustees must distribute them to the appropriate beneficiaries according to the terms of the trust deed.
- Account for All Transactions: Trustees are required to maintain accurate and up-to-date records of all trust transactions throughout the life of the trust, including income received, expenses incurred, and distributions made. These records must be made available to the beneficiaries.
- Prepare Final Accounts: Trustees must prepare final accounts that accurately reflect the trust’s financial position at the time of closure. These accounts must be reviewed and approved by the beneficiaries.
- Obtain Releases and Indemnities: Upon completion of the distribution process, trustees should obtain releases and indemnities from the beneficiaries to protect themselves from any future claims.
- Consider Tax Implications: Trustees must be mindful of the potential tax implications of the trust closure. This may include capital gains tax, inheritance tax, and income tax.
- Seek Professional Advice: Trustees should seek professional advice from lawyers, accountants, and financial advisors throughout the closure process.
Potential Challenges and Risks
- Identifying Beneficiaries: Identifying all beneficiaries, especially those who may be unknown or difficult to locate, can be challenging.
- Disputes Among Beneficiaries: Disputes may arise among beneficiaries regarding the distribution of trust assets or other matters related to the trust closure.
- Tax Liabilities: Unforeseen tax liabilities can arise during the closure process, potentially impacting the beneficiaries’ inheritance.
- Liability for Mismanagement: Trustees can be held personally liable for any losses incurred due to negligence or mismanagement during the closure process.
How we can help
We have a proven track-record of helping clients create Trusts. We are a multidisciplinary firm and have all the expertise inhouse to satisfy the most exacting requirements of our clients. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
How to Contact Our Wills and Probate Solicitors
It is important for you to be well informed about the issues and possible implications of creating a Trust. However, expert legal support is crucial in terms of ensuring your wishes are met as you would want them to be.
To speak to our Wills and Probate solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
Comments are closed.
