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Demystifying Trusts: Answers to Google’s Top Questions with Ben Rosen

In the video, private wealth & tax partner Ben Rosen tackles the most-searched public queries around one of the most frequently misunderstood vehicles in wealth planning–trusts. Following the response to our video on Diary of a CEO‘s tax debate, it became clear from the online commentary that people are unfamiliar with how they operate, particularly regarding taxation, asset protection, and on the death of a family member. Ben steps in to clarify.

Why are trusts used?

One of the most common misconceptions is that trusts exist primarily to avoid tax. In the UK, this simply isn’t the case. While tax considerations may come into play, trusts are fundamentally tools for succession planning, helping individuals preserve and manage wealth across generations.

Ben illustrates this with a relatable scenario: Imagine a successful business owner with two children, one actively involved in the business, the other not. The family may have concerns about inheritance being affected by potential issues like divorce, bankruptcy, or addiction. A trust can provide a balanced, protective structure, allowing the parent to support both children while safeguarding the longevity and values of the family business.

Why are trusts seen as complicated?

This often depends on who you ask. At their core, they are not complex. They are not standalone entities, but rather legal relationships between:

• The trustees, who look after the trust assets in accordance with the trust deed; and
• The beneficiaries, who can benefit from those assets.

The trust deed is a legal document outlining the powers and responsibilities of the trustees. Often accompanying this is a letter of wishes, a non-binding document that guides trustees on how to exercise their discretion in line with the settlor’s values and intentions.

The complexity often arises from legal terminology, not the concept itself. As Ben points out, understanding the “code” behind the legalese can make things clearer, something lawyers are trained to do for their clients.

Why are trusts so expensive?

Trusts exist on a spectrum. Some, like bare trusts, are straightforward and inexpensive. These might simply hold assets until a child reaches 18. Others, especially those involving complex family dynamics, business interests, or long-term planning, require tailored legal and tax advice, which can increase costs. The level of complexity, and therefore expense, should reflect the needs and goals of the person setting up the trust.

Why are trusts allowed?

Trusts are not shadowy loopholes; they are lawful, regulated structures. In the UK, most trusts must be registered with HMRC’s Trust Registration Service (TRS). This ensures transparency and compliance with financial and anti-money laundering regulations. Trusts are allowed within strict legal boundaries, and their existence supports legitimate planning needs, particularly where families are navigating intergenerational wealth or complex personal circumstances.

Final Thoughts

As Ben make clear, the purpose of trusts is not to game the tax system, but to provide flexible, legally recognised ways to protect assets, plan for the future and honour family wishes. When designed and administered properly, trusts are not about secrecy, they’re about clarity, control, and care. 

Watch the full video to hear Ben’s answers in depth and understand why, far from being loopholes for the wealthy, trusts are vital tools for anyone navigating life’s complexities with foresight.

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When It’s Too Late To Choose: The Cost Of Not Having A Lasting Power Of Attorney

Planning for the future is a vital part of ensuring personal affairs are managed effectively if capacity is lost.

A Lasting Power of Attorney (LPA) is a legal document that allows an individual (the donor) to appoint a trusted individual (or individuals) to make decisions on their behalf should they become unable to do so.

Failing to put in place an LPA can lead to complex, time-consuming, and costly consequences.

Types of LPA

There are two types of LPA in England and Wales:

Property and Financial Affairs LPA

This covers decisions such as managing bank accounts, paying bills, and selling property.

Health and Welfare LPA

This relates to care needs, medical treatment, and life-sustaining decisions.

Both must be made whilst the donor has mental capacity and registered with the Office of the Public Guardian to be valid.

What does it mean to lose capacity?

Mental capacity refers to the ability to make a specific decision at the time the decision needs to be made. This includes understanding information relevant to decision making, retaining it long enough to weigh up options, and communicating a choice.

Capacity can be lost gradually, such as through dementia, or suddenly, due to a stroke or serious injury. Importantly, capacity can fluctuate, and it may be that an individual might lack capacity at a particular point in time but regain it later.

As well as time-specific, capacity is also decision-specific, and a person may lack the capacity to make one kind of decision, but retain capacity to make others.

Without the necessary capacity, you may be unable to manage your financial affairs, make decisions about your health and welfare, or even handle day-to-day matters.

Critically, once capacity is lost, it is too late to put an LPA in place.

What happens if you lose capacity without an LPA?

If you lose mental capacity and do not have an LPA in place, no one automatically has the legal authority to manage your property or finances, and only the healthcare professionals treating you will be able to make health or welfare decisions on your behalf, acting in what they believe to be your best interest. In this situation the Court of Protection must be involved, and someone (often a loved one) must apply for a deputyship order to act on your behalf. This process can be:

Lengthy

The application process typically takes 6-12 months, and potentially longer if contested or delayed. During this time, no one can legally manage your finances or make decisions, which can affect bill payments, care arrangements, or property sales.

Costly

Costs include application fees, legal fees, medical assessment costs, and ongoing annual fees for example. A deputyship is much more time consuming and costly compared to making an LPA.

Restrictive

A deputy’s powers, once granted, are limited, and they are subject to ongoing court oversight.

Stressful

Applying to the Court of Protection for a deputyship order is a process that can be slow, expensive, and emotionally taxing, especially if there is a disagreement over who should apply or how decisions should be made. The lack of clarity and legal authority can cause confusion, disputes among family members, and emotional distress at an already difficult time.

Why set up an LPA?

An LPA is a legal document that allows you to appoint one or more trusted individuals (your attorneys) to make decisions on your behalf if you lose capacity. Key benefits include:

Control

You choose who acts for you and you can set out clear instructions or preferences.

Speed and simplicity

Attorneys can either act immediately once the LPA is registered (Property and Financial Affairs LPA only), or once you’ve lost capacity.

Peace of mind

Having a valid LPA in place can avoid the cost, delay, and complexity of court proceedings.

Respect for your wishes

LPAs can be tailored to your wishes and ensures that future decisions made by your Attorneys reflect your values and preferences.

A vital safeguard for everyone

An LPA is a vital part of lifetime planning, just like a Will. Without it, your finances, health, and welfare decisions could fall into the hands of the Court rather than trusted individuals of your choosing.

To discuss your requirements and find out how we can help you, please get in touch.

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Yesterday’s Losses, Tomorrow’s Gains

The 2024/25 tax year has just come to a close, which means the window is now open to submit that year’s tax returns.

If you have been investing in cryptoassets, you need to think carefully about whether you have a tax liability, and whether you need to submit a tax return. Now would be a good time to review our previous guidance on cryptoasset taxation.

Hopefully you have some big gains to report. However, sometimes you win, and sometimes you lose. Not every year is necessarily going to be a success: sometimes you may find that your losses in a tax year outweigh your gains.

While no-one enjoys losses, there is one silver lining, as you can carry them forward to future years. This means that when (hopefully) you make gains in the future, you will be able to offset these losses, and so reduce your Capital Gains Tax bill.

However, there is a catch, as you can only make use of losses that you have reported to HMRC within four years of the end of the tax year in which they arose. If you fail to tell HMRC about them within this period, then they are simply wasted.

You can of course report losses within a tax return, but if you are not required to submit a tax return for the relevant tax year, you can still simply write to HMRC to claim the losses. They will then be available to carry forward indefinitely until you have capital gains to offset them against.

For example, after a bad year of cryptoasset investments you might find yourself with net losses of £100,000. Then, in a future year, you might end up with net gains of £200,000. Provided you remembered to claim the losses in time, you can offset the loss, which (at a top Capital Gains Tax rate of 24%) will save you £24,000 in tax.

It’s not just your actual losses that can be claimed. If you have tokens that have become worthless, or if you have lost one of your keys, you may be able to put in a negligible value claim, which generates a loss as though you had sold the token for a nil value.

The cryptoasset experts in the Private Wealth & Tax team at Quastels can help with these issues. They are able to calculate your income and gains (or losses) and can assist in reporting this to HMRC. They can also provide advice on tax and estate planning with cryptoassets, as well as advising on the law regarding digital assets and digital estate planning generally.

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