Trustees’ duty to give information to beneficiaries

It can be flattering to be asked by a relative or close friend to be a trustee of their estate, but this is a role with important legal obligations and disputes can arise when beneficiaries do not agree with the actions of trustees. One such area of potential disagreement is the amount of information that is circulated to beneficiaries.

Karen Starkey, a specialist in Wills, trusts and probate at KWW Solicitors, explains that trustees have a duty to account to the beneficiaries and to provide information about the trust to them. “These are vital tools in the beneficiaries’ armoury when holding trustees to account, and this can be important if there is any suspicion that trustees are acting improperly,” says Karen.

A trust may be set up to protect money or property while it continues to benefit certain people (the beneficiaries). For example, a trust of property may be available for named adult children to live in, or a trust fund may pay for the beneficiaries’ university fees. The fund or property is managed by the trustees who must administer the trust in accordance with clear legal principles. 

Each trustee owes specific duties toward the beneficiaries, including the duty of good faith, to act in accordance with the trust deed and they have an obligation to account to the beneficiaries for their stewardship of trust assets.

Keeping beneficiaries informed
In discharging these legal responsibilities, as a trustee you have an important duty to keep the beneficiaries informed. The trustees must keep accounts and provide them to the beneficiaries if they ask for them, give them reasonable information about the investment and management of the trust fund and inform a beneficiary when they become entitled under the trust.

Information requests from beneficiaries
Conversely, the beneficiaries are entitled to request information to reassure them that the trust is being properly administered. However, the beneficiaries’ entitlement to information from the trustees is not unfettered and trustees do not have to comply with every request for details and information of the beneficiaries. They must have genuine reasons for seeking disclosure of information, such as holding the trustees to account or to protect their own beneficial interests.

In a recent case, Lewis and others v Tamplin, the beneficiaries made numerous requests to the trustees for information about the trust as they believed that distributions of trust money had been made to other beneficiaries but not to them. The trustees refused to respond on the basis that the beneficiaries had enough information. However, the court decided the beneficiaries had the right to disclosure as they wanted the information to hold the trustees to account – and that was a valid reason.

While the court said that the beneficiaries were entitled to disclosure of documents relating to advice sought by the trustees in relation to the trust itself and for the benefit of the trust and the beneficiaries, they were not entitled to see documents that were protected by legal professional privilege of the trustees in any other capacity. Nor can beneficiaries require the trustees to disclose information or documents to hold them account specifically for their management decisions.

Beneficiaries do not have the right to see everything, so how should you respond to a request from a beneficiary for additional information? You should consider, for example, whether they have valid reasons to see the information, if it is reasonable to supply the information requested and whether it is privileged so that they do not have the right to see it.

When information is not provided
The law allows beneficiaries to ask the court to uphold their rights by making the trustees accountable. This means if you refuse a request for information from beneficiaries, they may ask the court to order disclosure of the information. The court will not simply accept an argument that the beneficiaries already have enough information, there must be good reason in law why disclosure should be refused.

As a trustee, you need to consider requests for information and documents from beneficiaries carefully. If you are inclined to refuse a request it must be for a proper reason, otherwise there is a risk of a legal dispute. 

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

The probate process and our role

This quick-reference table explains the role of your solicitor at each of the various stages of obtaining probate. We hope this helps you to understand the process and how our expert lawyers can support you at every step of the way.

You need to…Your solicitor will…
Register the death with the local
register office.


Obtain the death certificate from
the local register office and a few
certified copies.
Locate the Will if there is one
Instruct our probate solicitor to
handle the legal work.

Provide proof of your identity.

Provide the Will and copies of
the death certificate.





Verify your identity.

Explain the probate process to you
depending on whether there is a Will,
or, if not, how the intestacy rules
apply.
Identify the executor(s) appointed
in the Will. If there is no Will, we
identify the next of kin legally
entitled to administer the estate.
Provide contact details of all
known beneficiaries.

Identify the beneficiaries entitled
under the Will or the beneficiaries
entitled under the intestacy rules.
Provide:
* details of properties
* all bank and building society
account details
* share certificates
* investments
* premium bonds
* National Savings certificates
* life insurance policies
* pension and annuity details
* details of other assets of value,
eg: antiques, paintings,
jewellery and collectables

Provide details of any debts and
liabilities.

Provide details of any lifetime
gains made by the deceased
within the past seven years.
Identify whether we will apply for
a grant of probate or letters of
administration to deal with the
estate/grant.

Contact relevant establishments for
a final valuation of bank accounts,
shares, investments etc.

Obtain valuations of property and
any valuable items as at the date
of death.

Calculate an initial value of
all assets and liabilities.
Swear a legal oath or make a
statement of truth that the
information provided is true
and correct.




Calculate any inheritance tax due.

Complete appropriate HMRC tax
forms and pay inheritance tax.

Send the probate application with the
sworn oath or statement of truth and
probate fee to the probate registry.
Place statutory notices in the
London Gazette and local papers to
alert potential creditors of our
intention to distribute the estate to
the beneficiaries.
We will give you two copies of the
grant.

Send the grant to the financial
institutions and other asset holders
and request full payment to the
assets.

Place the money into a dedicated
executor’s bank account.

Settle outstanding estate expenses,
debts and liabilities, including any
final inheritance tax due.
Advise if varying any will save
inheritance tax or otherwise benefit
the beneficiaries.
Make a bankruptcy search of the
Land Charges Register against
beneficiaries.

If a beneficiary has been declared
bankrupt, we will contact the trustee
in bankruptcy about where the
beneficiary’s inheritance should be
paid into.
If there are no challenges to the
estate, we will distribute the net
estate to the beneficiaries entitled
under the Will or intestacy rules and
obtain receipt.

If any challenges to the Will are
expected, we will advise you on the
implications.
You will approve and sign off
the final estate accounts.
Complete and file all paperwork

Tax planning for your inheritance

Planning how to deal with your assets in a tax-efficient manner is an important but potentially complex task. An increasing number of estates will be liable to inheritance tax (IHT) on the owner’s death, so it is vital to consider how your Will can be drafted to reduce the amount of tax that will be taken from your estate after you die. You can also consider whether to make gifts during your lifetime to minimise your IHT liability but this raises other tax considerations. Karen Starkey, one of our specialist Wills, trusts and estate planning solicitors, explains what you need to think about when planning for your inheritance if you wish to minimise your tax bill.

Why should I think about tax now?
The IHT threshold for an individual is £325,000 (also known as the Nil-Rate Band), so if your estate is worth more than that on your death, the value of your estate in excess of £325,000 could be taxed at 40%. Many estates in our pricey part of the world here in Surrey and the south-east will exceed this threshold, particularly given the steep rise in property prices over recent years. 

How can my Will reduce IHT?
You can utilise various available tax reliefs and exemptions in your Will to reduce the tax bill on your death, including:

  • Spouses and civil partners: Gifts made to your spouse or civil partner are exempt from IHT, so the value of any property or share in a property left to your spouse or civil partner will not be taken into account for the purposes of IHT
  • The Transferable Nil-Rate Band: If you survive your spouse or civil partner, the basic threshold available for your estate can be increased by the percentage of the threshold unused when they died. For example, John died leaving an £600,000 estate. He left £130,000 to his son and John’s wife inherits the balance. Only £130,000 out of the £325,000 threshold was utilised, so the unused 60% (£130,000 is 40% of £325,000) is transferrable to the wife’s estate. On her death, her total IHT threshold will be £520,000 (£325,000 plus £195,000)
  • The Residential Nil-Rate Band: An additional allowance is available if you leave one residential property to your direct blood descendants, such as your natural children and grandchildren. This is currently £125,000 rising £25,000 each year to £175,000 in 2020/2021. If you own more than one residential property your executors will nominate which one will qualify
  • Charities: Gifts made under your will to UK charities and political parties are also exempt from IHT; and
  • Will trusts: A carefully structured will trust can protect an inheritance from tax charges. You can leave money or property on trust for your beneficiaries in accordance with your specified wishes, for example, to fund their university education or a deposit for a property.

How else can I reduce my tax liability?
If funds allow, consider making gifts during your lifetime to reduce the value of your estate and the potential IHT liability on death. You can make as many gifts of £250 to anyone you like without them being liable for IHT. You also have an annual exemption of £3,000, so you can give up to £3,000 to someone without incurring IHT (or £1,000 each to three people). You could also consider making a gift known as a ‘chargeable transfer’. Although IHT may be payable if you die within seven years of making the gift, the potential tax decreases each year until it falls outside of your estate after seven years. 

Further reliefs and exemptions may be available via business or agricultural property relief and shared property relief.

Are there other tax implications?
Tax planning for inheritance must include consideration of other taxes, notably capital gains tax (CGT) which can be a trap for the unwary. Importantly, CGT liability dies with the individual but it may arise if you make lifetime gifts.

A gift of property (other than your main home) or an expensive work of art could, for example, give rise to CGT on the increase in value since you acquired it. This means that while a lifetime gift would reduce your IHT liability on death, it could incur an immediate CGT bill when the gift is made. You need to carefully consider whether it makes more financial sense to make a lifetime gift and pay a CGT bill now, or deal with it in your will and save IHT on your death.

Finally, there may also be income tax considerations if you create a trust, as the income from a trust fund is liable to income tax.

This is a highly complex area of law, and to find out about how best to navigate the tax implications you should see a specialist solicitor who specialises in inheritance tax planning.

Busting the myths of cohabitation

Unmarried couples are not offered the same protection as married couples and civil partners. Cohabiting couples often assume that moving in together creates similar rights and responsibilities as marriage (so-called ‘common-law marriage’) or absolutely no rights at all. Both beliefs are wrong. If you are moving in together, or you are the parent of someone in that position, you should know how cohabiting affects your/their legal position and what protections there are should the relationship end or one of the cohabitees dies. David Anstee, our specialist family solicitor, explains…

Common law marriage
The concept of common-law marriage has no legal validity in England and Wales. Moving in together does not give you automatic rights to each other’s property, no matter how long you live together. And if your partner dies, cohabiting does not entitle you to inherit. Conversely, however, if a cohabiting couple separates and there are children involved, both cohabiting partners may have rights and responsibilities, even if only one of them is the biological parent.

Moving in together: Cohabitation rights
Cohabitation does not automatically give you rights to the home you share. Problems can occur, particularly when one of you moves into a property the other owns or rents. If the property is rented, only the tenant(s) named in the rental agreement generally has the right to live there and the responsibility for paying the rent. If you are not a named tenant:

  • You are likely to need the landlord’s consent to move in
  • The named tenant can ask you to move out at any time (after giving reasonable notice)
  • You have no right to stay if the named tenant decides to leave (though you might be able to agree a new tenancy with the landlord).

Similar rules apply if the property is owned by one of you. The property owner is the only one entitled to live there. Anyone else can be asked to leave. The owner can also make decisions, such as selling the property, without consulting their partner. However, even where only one of you owns the property, the other may have some rights (eg: to a share of the money if the property is sold). This can happen if:

  • The owner has agreed in writing that the non-owner is entitled to a share of the home
  • The non-owner contributes financially (eg: paying part of the mortgage) to the property on the understanding that this entitles him or her to a share
  • The non-owner has acted to their own detriment (eg: giving up a job) on the understanding that this entitles him or her to a share
  • A partner with children applies to the court for the right to continue living there to ensure the children’s welfare.

Owning a property in joint names can help to protect the rights of both cohabiting partners but there are potential pitfalls. For example:

  • You cannot force your partner to sell the home if you decide to leave, unless you apply for a court order
  • Even if you contributed most of the costs of buying the home, you would normally only be entitled to a half share, unless you have agreed otherwise
  • If your partner leaves you, you are likely to be liable for the full amount of any mortgage payments.

If you are buying a property together, you might consider something called a declaration of trust. This will confirm contributions to the purchase price, purpose of the property, when the property should be sold and division of the proceeds if you split up.

Cohabitation: Possessions and finances
Cohabiting couples have no legal duty to support each other financially, either while you are living together or if you separate. Nor do you automatically share ownership of your possessions, savings, investments and so on. In general, ownership is unaffected by moving in together. So:

  • If you already owned something before you started to live together, it continues to be your sole property
  • If you buy something yourself using your own money, it is your property
  • If you buy something together, you own it in the shares that you each contributed to the purchase price unless agreed otherwise
  • If your partner gave something to you as a gift, you own it (though proving that a gift was made can be difficult unless there is written evidence).

A written cohabitation agreement can help avoid disputes: for example, by setting out how much you each contribute to a joint account and how ownership of any items bought using the money will be shared.If you have any debts in joint names (eg: credit cards), you are normally each liable for the debt. If your partner fails to pay, you can be pursued for the full amount. You may also both be liable for household bills.

Moving in together makes no difference where taxes are concerned. They continue to be assessed in the same way as any other individuals. However, any benefits you claim will be assessed on the basis that you are a couple. This means your partner’s income will be taken into account and your entitlement to benefits may be reduced.

Cohabitation and children
Legally, you only have a role in important decisions about children (such as their education and religion) if you have parental responsibility for them. If the parents of children are not married, only the mother automatically has parental responsibility. The mother’s partner only has parental responsibility if:

  • He is named as the father on the birth certificate (for a child born after December 2003)
  • He enters into a parental responsibility agreement with the mother, obtains a parental responsibility order or child arrangements order, or they get married;
  • He is registered as the child’s guardian and all other individuals with parental responsibility have died (including the mother).

If a cohabiting couple separate, different considerations apply:

  • Decisions about who the children should live with and what contact rights the other should have are based on the children’s best interests rather than on who has parental responsibility.
  • If your children live with your former partner rather than you, you may be required to pay maintenance.

The same principles apply for stepchildren whom you have treated as part of your family and helped to support financially. Ideally, childcare arrangements will be agreed between you but either of you can apply to the court to help resolve things. In effect, children are treated in the same way as when a married couple divorce.

What happens if a cohabiting partner dies?
Cohabiting partners have no automatic right to inherit if their partner dies, although they may be a beneficiary under the other’s Will. If you are a beneficiary, any assets you receive may be subject to inheritance tax. There is no exemption for unmarried couples. If you have lived together as man and wife for at least two years or if you can show that you were financially dependent on your partner, you can make a claim for a financial settlement even if you were not a beneficiary of the Will.

However, making a claim on the basis of a common-law marriage like this can involve a complex and expensive dispute with the other beneficiaries. And even if you are successful, you may only be entitled to a limited share of your partner’s assets.

If you owned your home together, the form of legal ownership has a major impact. If you owned your home as ‘joint tenants’, you will automatically continue to own the (entire) home if your partner dies. But if you were ‘tenants in common’, your partner’s share is dealt with under the terms of his or her Will. If you rented your home, your rights to stay depend on the type of tenancy, whose name(s) it is in and your landlord.

You will not be entitled to state benefits such as Bereavement Support Payment or a state pension based on your former partner’s National Insurance contributions. Whether you have any entitlement under private pension or life insurance arrangements depends on whether the particular scheme’s terms gives rights to a cohabiting partner.

Cohabitation agreements
Written agreements can help to protect you from potential risks if you separate or your partner dies. Drawing up a cohabitation agreement can help you think through some of the key issues in your relationship. Though not all of the agreement may be legally enforceable, it can help reduce the likelihood of disputes and make any disputes easier to resolve. For example, an agreement might cover issues such as how bills will be shared, whether you will have any joint accounts, and what roles you will each have in terms of childcare, household chores and so on.

Other possibilities include:

  • Clear arrangements covering ownership of the home and what rights each of you have to live there
  • Taking steps to get parental responsibility for children
  • Appointing each other to hold a lasting power of attorney (so that if one of you is no longer capable, the other can take decisions on his or her behalf)
  • Reviewing your Wills and ensuring that you have each made appropriate provision for the other
  • Checking – and, if appropriate, changing – key financial arrangements such as pension schemes, life insurances, savings and investments.

Why we need to check your identity before we begin

The vast majority of our clients would never dream of doing anything illegal. However, a very tiny number of individuals may try to launder money through our accounts by instructing us to undertake work for them which at first sight appears legitimate but which is actually part of a process designed by them to hide the proceeds of criminal activity.

When we act for you, we are obliged by the Proceeds of Crime Act to ask you to provide us with proof of your identity and address. We may have to do this even though we have acted for you before. We may also have to ask you to provide further information about transactions which you instruct us to undertake on your behalf. We hope you will not find these requests to be intrusive and that you will appreciate why this is necessary.

The Proceeds of Crime Act places all solicitors under extremely strict rules to ensure criminals and terrorists do not try to use us as a way to launder money derived from criminal activities. One of the ways we do this is by being absolutely certain who we are acting for and precisely what the purpose of any transaction is. Failing to spot money laundering when we should can lead to us facing criminal charges so we take this issue very seriously.

All partners and employees of KWW Solicitors have been trained to spot attempts to launder money or other illegal financial transactions. They also undergo regular training to ensure their knowledge of this area is kept up to date. KWW also has a dedicated partner who acts as the firm’s Money Laundering Reporting Officer. He has responsibility for the firm’s anti-money laundering policy and acts as our liaison with the National Crime Agency (NCA).

All solicitors firms, accountancy firms, banks and other financial institutions have a legal obligation to ensure they have procedures designed to combat money laundering.

Private Individuals
When acting for you we are required by law to check your identity and we may also wish to confirm information about your credit status. To verify the information you provide, we may make searches about you with a credit reference or fraud prevention agency; this will include information from the Electoral Roll. The agencies will record the details of the search and other organisations may share these searches to prevent fraud and money laundering. Scoring methods may be used as part of this process.

We will ask you to supply original documents as confirmation of your identity, address or both which we will use along with any electronic checks we perform. Any documents provided to us will be recorded and copied for audit purposes as part of our Anti-Money Laundering requirements. Suitable items for the proof of identity could be a current passport or driving licence, and for the address, a utility bill, council tax bill or bank statement that is no more than three months old. We may also require supporting evidence of the source of any money involved, for example bank or building society documents, and full details of any third party to whom you may instruct us to send funds.

Corporate and other business clients
Before we can act on behalf of a company we will need to verify and identify the existence of the company including its name, business address, registration number and the names of at least two directors through the certificate of incorporation and/or details from Companies House. Additionally, we may request to see Annual Accounts and Incorporation documents and where necessary a suitable resolution confirming that the persons who are representing the company are properly authorised.
We may require supporting evidence of the source of any money involved, for example bank or building society documents, and full details of any third party to whom you may instruct us to send funds.

Your most valuable asset must be handled with care

Did you know there are more than 11 million people in the UK aged over 65, and nearly 80% own their own home. If you are of that generation, you might be thinking about how you can pass your assets to your children or grandchildren in the most tax-efficient way. Or perhaps you’re worried about nursing home fees and means testing. You may even be thinking about side-stepping a creditor.

Your home is almost certain to be the most valuable asset you have, and rightly or wrongly you may be under the impression that the smart thing to do is to give it away or put it into a trust. Here, we would like to offer some words of wisdom to help you come to the right decision. We must stress that what follows does not constitute formal advice and that you should always seek guidance from a qualified professional.

Let’s start by saying this: Giving away the family home (whether outright or into trust) tends to be a pretty bad idea. There are a number of reasons: If you continue living in the property after giving it away, inheritance tax (IHT) may continue to apply to the property at 40% on your death under the ‘reservation of benefit’ rules.

The only way to avoid a reservation of benefit is to pay a full market rent for living in the property. This may cause cash flow problems and the full market rent needs to be reviewed every two to three years. If the rent paid falls below market value, the reservation of benefit rules will kick in. In addition, if rent is paid, whoever now owns the property (an individual or trustees) will be liable to income tax on that rental income. Effectively, there is a double tax; you will have paid tax on your own funds and then the new owner of the property will pay tax again.

From a capital gains tax (CGT) perspective, you will lose ‘principal private residence’ relief, which provides that no CGT is payable on a sale or other disposal of the property. If you give the property to a trust of which you are a beneficiary, the reservation of benefit will still apply for IHT purposes but the CGT ‘principal private residence’ exemption will be preserved.

Generally (excluding the reservation of benefit rules), if you give a property to an individual, there will be no IHT to pay provided you survive the date of the gift by seven years. If, however, you transfer the property into a trust, there will be an immediate charge to IHT at 20% of the value of the property (subject to any nil rate band, up to a maximum of £325,000 per person, or £650,000 per married couple if the property is jointly owned).

If the property is transferred into a trust, there will be ongoing IHT charges every 10 years, based on the value of the trust fund at that time, at a maximum rate of 6%. If the property is transferred into a trust, and the property (or proceeds arising from a sale of the property) is subsequently distributed to any of the beneficiaries, there will be a charge to IHT of up to 6% of the amount distributed.

Ordinarily, if you own a property in your own name, your estate will benefit from an ‘uplift’ for CGT purposes so that any gain on the property before your death is effectively wiped out. If, however, you transfer the property to an individual or to a trust, this ‘uplift’ will no longer apply; CGT will be payable on a future sale, based on the increase in value since the date of your gift.

It is sometimes thought that giving away property will take it out of the calculation of the contribution to the costs of care. However, if you give away assets and subsequently move into a nursing home, it is almost certain that the gifted property will be treated as ‘notional’ capital which still belongs to you under the ‘deliberate deprivation’ rules and still be taken into account.

In addition, it is wrongly believed that giving the family home to another person or into trust will put it beyond the reach of creditors. The court will, however, set aside these gifts if:

• The gift is made within two years of bankruptcy
• The gift is made within five years of insolvency
• The gift is made at any time with a ‘material intention’ of putting assets beyond the reach of creditors

Finally, there are occasionally horror stories of children who were given the family home by their parents, who then promptly sold it from under them (although more often a sale might be forced by the child’s death, divorce or bankruptcy).

Is there an alternative?
We’ve come up with three alternative courses of action for you to consider:

1. Downsize to a smaller property (or assisted living accommodation) and give away some of the sale proceeds left over
This is the most straightforward alternative. On a sale of the family home (assuming it is held in your personal name and you live in the property) there will be no CGT to pay. On a subsequent gift of part of the sale proceeds, there will be no tax consequences, provided you survive the date of the gift by seven years.

2. Borrow on security and give away some of the resulting funds
You may borrow against the property to generate excess cash. For IHT purposes this will reduce the value of the property on your death, because the borrowing will be deductible. However, it is important to ensure that the interest payable on the borrowing (especially rolled up interest on an ‘equity release’ loan) does not exceed the IHT saving.

3. Give a share in the house to a family member who lives in the property with you
If, say, an adult child lives with you, a gift into joint names with them should not fall within the reservation of benefit trap. But reservation of benefit will subsequently apply if, at a later date, they move out (to get married, say).