TRUST ACCOUNTS

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TRUST ACCOUNTS
Presentation to STEP CARIBBEAN CONFERENCE 5 7
May 2008

• Presentation by Frances Stephens, Rawlinson
  Hunter

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Trust Accounting

• Fundamental duty of stewardship
• Underhills Law of Trusts and Trustees
• Article 60 Duty of Trustee to be ready with
  his accounts

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Duty to Account

• Defence against enquiry
• Accurate record of trust history and of specific
  assets
• Consistent and regular reporting
• Comprehensive and clear explanation of trusts
  financial position and history
• Show interests of different beneficiaries and
  beneficial class
• Tax Returns and tax liabilities for trust and for
  beneficiaries
• Clear Concise Comprehensive

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Trust Accounts are for

• Trustees
• Settlor
• Beneficiaries
• Advisers
• Tax Authorities

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Before we start .

• Underlying records
• Cash Accounting/Double Entry Bookkeeping
• Nominal Ledger(s)
• Computer Systems
• Tax Records
• Accounting Policies
• Going concern
• Accruals
• Consistency
• Prudence
• Permanent File

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Permanent file

• Trust Deed and any Deeds of Appointment
• Summary of Trust history
• Summary of relevant provisions affecting
  Trust/settlor and beneficiaries
• Full details of the settlor domicile, residence
  status
• Dates of creation when property added
• Date of the settlors death, if relevant
• Summary of capital distributions and appointments
• Names and addresses of the trustees summary of
  any changes
• Names and addresses of present and future
  beneficiaries, dates of birth, etc
• Dates on which trust interest will vest in the
  future

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Permanent file (cont)

• Dates on which trustees power to accumulate
  income and/or exercise discretion over trust
  property (both income and capital) changes
• Any particular matters to the tax status and
  contingent liabilities of the trust fund, such as
• Decennial charges for Inheritance Tax
• Pools of income available for attribution
• Information relevant for Capital Gain Tax
  purposes, for example
• If the settlor is chargeable on trustee gains
• Trust gains which might be attributable to
  beneficiaries
• Implications for any disposal by beneficiaries of
  their interests
• Note of any gains held over
• Note of the potential apportionment of gains
  realised in an underlying company
• Any claims or elections

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Specific Areas

• (1) Cost v Market Value
• Cost - Consistency
• Probate value
• Purchase price
• Market value on gifts
• Enhancement expenditure
• Tax base costs Tax Returns
• Avoids
• volatility of market value
• Costs of valuations for unquoted assets
• Add market value as a note

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Specific Areas

• (1) Cost v Market Value
• Market value Commercial reality
• Clear view of trusts value
• Easier to assess return of investments and
  expected income flow
• Note the potential Capital Gains Tax
• Look at
• Exposure to tax
• Main function of the accounts
• Detailed investment schedules

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Specific points

• (2) Comparative figures
• Trends
• Expenses
• Distributions

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Specific Areas

• (3) Apportionment of Expenses
• Specific items
• Property expenses
• Fees
• Income v Capital
• Trust Deed
• Fair and reasonable
• Disclosure

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Specific points

• (4) Accruals
• Cash accounting
• Dividends
• Bank interest
• Expenses
• Consistency

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Specific Areas

• (5) Capital v Income
• Accrued Income Scheme
• Accrued interest on bought/sold
• Government Securities
• Capital for trust accounts
• Income for tax

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Sets of Accounts - Contents

• Synopsis
• Accountants Report
• Balance Sheet
• Capital Account(s)
• Income Account(s)
• Accumulations Account(s)
• Schedules
• Notes
• Clear Concise Comprehensive

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Trust Accounts Appendix 1A Specimen Set of
Trust Accounts
This is a simple set of trust accounts for fund
held by A on trust for income for life, remainder
to B absolutely.
The Frank Strachan 1975 Settlement Synopsis 5
April 2000 Date of Settlement 1 December
1975 Settlor Frank George Strachan Trustees Ms
Gillian Mary Turner and Martin James Spiller Law
of Trust England and Wales Perpetuity
period Expires on 1 December 2055 Terms of
Trust To pay the income to Amber Hurrell during
her life and then the capital to the children of
Amber Hurrell who attain the age of 21 years or
marry under that age, in equal shares. The
Trustees have power, under s32 of the Trustee Act
1925, to advance up to one half of the
presumptive share of the capital to the children
of the life tenant, subject to her written
consent. The Trustees have no power to pay or
apply capital to the life tenant. Beneficiaries Li
fe tenant Mrs Amber Hurrell Remaindermen Miss
Clare Hurrell (b. 10 September 1976) Miss
Amy Hurrell (b. 3 February 1980) Martin
Hurrell (b. 5 June 1982) Trustees
solicitor Brown Joyce Wale 32 Lamb
Street London WC1 Investment managers Trust
Managers Limited 423 Lombard Street London
EC4 Bankers and custodians Lloyds Bank
plc Strand Branch Location of trust
documents Brown Joyce Wale
This synopsis is not intended to be a
comprehensive statement of the terms of the
settlement. Reference should be made to the
relevant deeds as required.
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Trust Accounts
Report of the Accountants In accordance with
instructions given to us we have prepared,
without carrying out an audit, the accounts set
out below for the year ended 5 April 2000 from
the accounting records of the Trustees and from
information and explanations supplied to us. Ms
Gillian Turner, who is a Partner of Turner co,
is also a Trustee. 14 July 2000 Turner
Co Chartered Accountants
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Trust Accounts
Balance Sheet as at 5 April 2000
Approved by the trustees G M Turner M J
spiller 14 July 2000
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Trust Accounts
Capital account for the year ended 5 April 2000
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Trust Accounts
Income account for the year ended 5 April 2000
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Trust Accounts
Mrs Amber Hurrell current account
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Trust Accounts

• Notes on the accounts
• 1. Quoted investments
• Quoted investments are shown at the market value
  at the balance sheet date. Unrealised gains at
  that date of 31,215 (1999 - 38,178) have been
  taken to capital account. Full details of the
  investments held at the year end and those
  acquired and sold during the year are set out
  below together with the income arising thereon.
  If all gains were realised capital gains tax of
  approximately 9,250 would be payable.
• 2. Freehold property
• Bankside Cottage is occupied by the life tenant,
  Mrs Hurrell. The Trustees are responsible for
  the external repairs and the maintenance of the
  fabric of the property Mrs Hurrell is
  responsible for all internal repairs and
  decorations.
• Development covenant
• The Trustees retained a covenant upon the sale
  of land adjacent to Bankside Cottage in 1982
  entitling the trust to 50 per cent of the
  increase in value of the land which may arise
  from the future successful application for
  planning consent for development. The covenant
  expires on 21 December 2010.

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Trust Accounts
Notes to the accounts
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Trust Accounts
Notes to the accounts
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Trust Accounts
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Trust Accounts
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Trust Accounts Appendix 1B Specimen
Accumulation and Maintenance Settlement Accounts
The Frank Strachan 1975 Settlement Synopsis 5
April 2000 Date of Settlement 1 December
1980 Settlor Frank George Strachan Trustees Ms
Gillian Mary Turner and Martin James Spiller Law
of Trust England and Wales Perpetuity
period Expires on 1 December 2060 Accumulation
period Expires on 1 December 2001, at which time
any beneficiary still under the age of 25, but
having attained the age of 18, will attain an
interest in possession. Terms of Trust the trust
was settled in 1980 as a fully discretionary
settlement for the children and remoter issue of
Frank George Strachan. By deed dated 1 February
1981 the trustees appointed the trust fund upon
accumulation and maintenance trusts for the
settlors children whereby, in default of the
trustees exercising their continuing limited
power of appointment, each of the settlors
children who attained the age of 25 years would
receive a vested interest in the income of an
equal share of the capital of the trust fund.
The children would become entitled to the capital
of that share upon attaining the age of 40. The
trustees have not exercised their power of
appointment. The Trustees have no power to pay
or apply capital to the life tenant. Principal
Beneficiaries Mrs Amber Hurrell (nee
Strachan) (b. 24 August 1965) Ms Kate Green (nee
Strachan) (b. 20 October 1968) William
Strachan (b. 13 October 1976) Simon
Strachan (b. 21 November 1978) Trustees
solicitor Brown Joyce Wale 32 Lamb
Street London WC1 Investment managers Trust
Managers Limited 423 Lombard Street London
EC4 Bankers and custodians Lloyds Bank
plc Strand Branch Location of trust
documents Brown Joyce Wale
This synopsis is not intended to be a
comprehensive statement of the terms of the
settlement. Reference should be made to the
relevant deeds as required.
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Trust Accounts
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Trust Accounts
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Trust Accounts
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Trust Accounts
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Presentation and Audit

• Presentation
• Trustees
• Beneficiaries
• Protector
• Statutory Requirements
• Audit
• Obligation or right

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Bibliography

• STEP and Tottel Planning and Administration of
  Offshore and Onshore Trusts Section D 4
  Trust Accounts
• STEP and Tolleys Administration of Trusts
  Section J Trust Accounts
• ICAEW Accounting Recommendations Trust
  Accounts 1986
• STEP Accounting Guidelines for the preparation
  of Trust and Estate Accounts in England and
  Wales

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Contact details

• Rawlinson Hunter
• Eighth Floor
• 6 New Street Square
• New Fetter Lane
• London EC4A 3AQ
• Telephone [phone]
• Fax [phone]
• Frances Stephens frances.stephens_at_rawlinson-hunter
  .com
• Simon Jennings simon.jennings_at_rawlinson-hunter.com
  
• Trust and Wealth Services
• Chris Hawley chris.hawley_at_rawlinson-hunter.com
• Mark Bonnet mark.bonnet_at_rawlinson-hunter.com
• Darren Wing darren.wing_at_rawlinson-hunter.com
• Michael Foster michael.foster_at_rawlinson-hunter.com