In most cases, you would be well advised to get professional help in setting up a trust.
The pitfalls involved in a DIY approach can be daunting and an experienced solicitor can guide you through the tax issues, trust law and other areas of concern:
Broadly speaking, trusts are subject to three kinds of tax: inheritance; income; and capital gains. The amount of tax that has to be paid depends on how the trust is structured. For example, if you want to set up a trust for the benefit of your children, an error in the timing of the distribution of assets from the trust could have major implications for inheritance tax liability.
An example of a pitfall here is a drafting error (which can easily occur where one is not familiar with drafting conventions) that creates an interest that fails to vest within the perpetuity period and causes the trust to fail.
It may be that a defect in the trust structure does not become apparent until after you have signed documents and begun to file tax returns — in fact, it’s often HM Revenue & Customs who spot the flaws. At this point, things can get costly, and it probably will not be possible just to undo the structure and start over.
An experienced solicitor who routinely handles trust and estate matters may be able to offer suggestions and insights that you may not have thought of. After all, she is likely to have helped any number of other clients with circumstances and objectives similar to yours.
Of course, solicitors can make mistakes. But a solicitor who is experienced and up-to-date in the area is much less likely to make an error than a non-expert who has “draft a trust deed” alongside “clean out the garage” on his Saturday to-do list. In addition, if a solicitor does make a costly error, you may well have a negligence claim against him, which should in turn be covered by his professional indemnity insurance.
Yes, there is a cost involved in using a solicitor. Consider, though, that what you’re paying for is both a source of significant expertise and, in effect, a form of insurance cover.
Finding a solicitor
Online research is often a good way to find a solicitor. You can also search for a solicitor in our directory by using the form on the right-hand side of this page.