Legal Practice Notes

Creation by transfer of property to trustees In practice, trusts are commonly established when a settlor conveys assets to independent trustees, who then hold the property on trust for named individuals. The formalities for a valid voluntary trust (that is, one without valuable consideration) must be observed. A voluntary trust is regarded as fully constituted when: the instrument declaring the trusts has been duly executed the settlor has, having regard to the nature of the asset, done all that is necessary to transfer the property to the trustees In practice, the property most frequently settled includes: beneficial interests under other trusts insurance policies debts chattels shares in a company land Solvency both before and after an undervalue transaction is significant in guarding against the trust being set aside. Although rare, a settlor may choose to make a...

Continuity of employment ( ERA 1996) This Practice Note explores provisions of the Employment Rights Act 1996 concerning continuity of employment. It explains why length of service matters—namely eligibility to bring claims and the level of compensation—and sets out the general principles of calculation; when a period of continuous employment commences and ends; what constitutes a break in continuity (a break in service); how the continuous period is worked out; situations in which a change of employer does not interrupt continuity; which weeks count where there is a contract of employment and which weeks count where no contract is in place; the effect of sickness, injury or a temporary cessation of work; the operation of any arrangement or established custom that preserves continuity; the impact of zero hours contracts; rules applicable to health service employers; protection of redundancy payments for NHS and public...

Orders issued by the Court of Protection do not invariably need enforcing—for instance, a declaration about P’s capacity, or lack of capacity, or a ruling that a specific course of conduct is lawful or unlawful. Nevertheless, there are many situations in which enforcement of the court’s orders becomes necessary, such as where P’s property and financial affairs have suffered financial abuse, or where personal contact with P has to be regulated, as appropriate in the circumstances. The Court of Protection ( Co P) holds wide-ranging powers to enforce its orders, by the court when required, under the Mental Capacity Act 2005 ( MCA 2005) and the Court of Protection Rules 2017 ( COPR 2017), SI 2017/1035. Under s 47(1) MCA 2005, the Co P is given enforcement powers equivalent to those of the High Court. In the same way as the Civil...

Constructive trusts This Practice Note considers constructive trusts, one of three trusts that do not need to be declared or evidenced in writing—the others being resulting trusts and implied trusts, though it is doubtful that any implied trust is not in truth either constructive or resulting. It looks at what amounts to a constructive trust, when such a trust may arise or be imposed, how unauthorised gains made by a fiduciary are dealt with, and the exposure of third parties. In Paragon Finance v D B Thakerar & Co ( Court of Appeal), Millett LJ split constructive trusts into two classes, distinguishing between: the constructive trust proper, where equity intervenes to stop the legal owner unconscionably denying another’s beneficial interest (the institutional constructive trust) the so‑called constructive trust, where equity grants relief for fraud by requiring those involved to account as if they were...

Constituting the trust As a rule, no trust comes into being, whatever the settlor intends, unless legal title is actually placed in the trustees. This step is called constituting the trust. The trustees must control the property. Where the transfer attracts formalities—for instance with land or shares—those requirements must be met. A trust becomes fully constituted by the settlor either: making an effective transfer of specified property to the trustees and stating the trusts on which they are to hold it; or declaring that property already vested in them is, from now on, to be held by them on trust. The effect of constitution of the trust Once constituted, a trust is: irrevocable by the settlor despite its voluntary nature, like a completed gift that binds the donor and cannot be undone (save where the terms of the trust expressly confer a power of...

This Practice Note offers hands-on guidance on what is required for a company seal. If a company keeps a seal and chooses to use it, practitioners must check it meets the applicable provisions of the Companies Act 2006 ( CA 2006). Do note, not every company holds a seal, and those that do are not required to execute simple documents under seal, where appropriate and necessary. For more detail, see Practice Note: Execution formalities—companies. We have developed a comprehensive, interactive collection to help users pinpoint and navigate key concepts and frequent issues when executing documents, including guidance on using a company seal. It brings together practical guidance, relevant precedent clauses and Q& As for each section or phase, enabling users to work methodically through that stage. For further information, see: Execution collection for...

What is a community interest company? A community interest company ( CIC) is a form of limited liability company created to carry on business for social aims or to benefit a community. CICs must meet ordinary UK company law obligations and are also overseen by additional rules to ensure their assets, income and profits are applied for the community they are set up to serve. A CIC is a social, profit-making enterprise. It is not a ‘not-for-profit’ organisation; it must generate profit to remain solvent, but those profits are committed to its community purpose rather than private gain. Legal framework The principal legislation governing CICs comprises: the Companies Act 2006 ( CA 2006) and subordinate legislation the Companies ( Audit, Investigations and Community Enterprise) Act 2004, Part 2 and Schedules 3 to 7 ( C( AICE) A 2004) the Community Interest Company...

Charity trustees’ responsibilities—and the resulting potential liabilities—fall into three groups: statutory duties, fiduciary obligations owed to the charity, and common law duties owed to third parties. The Charities Act 2022, which revises the Charities Act 2011 ( CA 2011) following the Law Commission Report on various technical matters in charity law, has not yet come fully into force. The main unresolved point relates to ex gratia payments by charities, eg to a deserving yet disappointed beneficiary under a Will that, owing to a technicality, leaves a benefit to a charity. Any enquiry in this area calls for checking the most current legislative position. Statutory duties The CA 2011 sets out a range of specific duties for charity trustees......

Trustees can appear in many different forms. They may be individuals, companies, or even a local authority in appropriate cases, as the law permits. That said, some categories of trustee face restrictions in practice. Companies can act as trustees, yet their ability to hold trust property is curtailed. Typically, such bodies are confined to serving as trustees of charitable trusts created to pursue the purposes for which they exist. One benefit, however, is that any property vested in that trustee automatically devolves to its successor without further conveyance. For charities connected with non-educational Church of England matters, churchwardens may serve ex officio as trustees, but only as regards personalty and not realty; otherwise a Diocesan authority or other custodian trustee must also be in place. Under the School Sites Act 1841 ( SSA 1841), the churchwardens of a church can be...

ARCHIVED : This Practice Note is archived and is not being updated. CPR PD 51O has been revoked and, from 1 October 2025, superseded by CPR PD 5C. For help with CPR PD 5C, consult the Practice Notes: How to use CE- File—from 1 October 2025 and When and where is CE- File applicable?—from 1 October 2025. NOTE: the CE- File pilot is scheduled to end on 1 November 2025. From 1 October 2025, CPR PD 51O is replaced by CPR PD 5C, which renders CE- File a permanent feature. For assistance on the revised regime, including what has changed between CPR PD 51O and CPR PD 5C, refer to the Practice Notes: How to use CE- File—from 1 October 2025 and When and where is CE- File applicable?—from 1 October 2025. This Practice Note offers guidance on CE- File electronic...

Stop press The Non- Contentious Probate ( Amendment) Rules 2025 ( SI 2025/1004) amend the Non- Contentious Probate Rules 1987 ( SI 1987/2024), which set out practice and procedure for the Probate Registry. Effective from 3 November, they revise r 44 of SI 1987/2024 and make two key changes: End the option to enter a caveat in person at a registry Require a caveator issuing and serving a summons for directions to provide a supporting statement For further information, see: LNB News 10/09/2025 9. Caveats A caveat (also known as a stop) is a written notice that a person who wants to prevent a grant being issued may enter in any registry or sub-registry. Commonly, a caveat is used to block a grant because the validity of a Will is disputed, or who should administer the estate. By lodging a caveat, the caveator will be notified of any...

FORTHCOMING CHANGE: Following the Government’s response to the Ministry of Justice and the Office of the Public Guardian ( OPG) consultation “ Modernising Lasting Powers of Attorney”, the Powers of Attorney Bill received Royal Assent on 18 September 2023, becoming the Powers of Attorney Act 2023 ( PAA 2023). Once commenced, PAA 2023 will make amendments to the Mental Capacity Act 2005 ( MCA 2005) to create a more up-to-date lasting power of attorney ( LPA) service. The reforms will: introduce regulations enabling those involved in creating an LPA to choose to sign either digitally or on paper; remove the ability of attorneys to register an LPA, so that only the donor may register; set regulations governing identification verification requirements for registration applications; provide a single route for registration objections to the OPG and widen who can object to include third...

This Practice Note reviews what a ‘bare trust’ means and the inheritance tax ( IHT) approach taken to these arrangements. For details on the income tax and capital gains tax ( CGT) position of a bare trust, see Practice Note: Bare trusts—income tax and CGT. What is a bare trust? The label ‘bare trust’ refers to an arrangement where legal title to property sits with someone other than the beneficial owner of that same property for practical purposes. The beneficiary has unfettered rights to capital and income, while the legal holder undertakes the administration and day-to-day control of the assets concerned. Some examples of when a bare trust may exist are outlined below for guidance. Assets held for minors (children) Bare trusts gained in popularity following significant changes to the IHT treatment of settlements made by the Finance Act 2006 (see Practice Note: Finance Act 2006 changes to trust...

Executors General An executor is an individual chosen by the testator, usually in a Will or codicil, to: administer their assets, and give effect to the terms of the Will The office of executor arises from the testator’s Will or other testamentary instrument. A grant of probate confirms the executor’s authority. In practice, an executor can normally demonstrate entitlement only by securing probate, which banks and other bodies often require before allowing the executor to deal with and collect in the asset. The testator’s property vests in the executor from the moment of death without any gap in time. A testator may appoint: different executors for distinct parts of the estate some persons as executors of assets overseas and others for property in the UK separate executors for real property separate executors for literary estates The High Court may grant probate or letters of administration for any portion of the...

Asset protection trust An asset protection trust is created to shield property against possible risks and looming threats. Such dangers may arise from outsiders like would‑be potential creditors, or from a husband or wife during divorce. Alternatively, issues might stem from the beneficiary’s own traits and circumstances, for whom the trust is intended. That person may be careless with money or exposed to harmful pressures or addictions, for example drugs. Frequently, an asset protection trust takes a discretionary shape, though this is not essential or inevitable. It may instead grant the specified beneficiaries an immediate interest in possession. Where that applies, it ought to be clearly subject to overriding powers of appointment, allowing the interest in possession to be ended if a beneficiary is made bankrupt or faces an adverse claim by a creditor or a husband or wife....

Apportionment rules ought to be addressed when a Will is being prepared. Where a Will establishes a trust, such rules may automatically operate or be disapplied unless the Will’s terms expressly deal with them. Their core function is to keep an even hand between those entitled to the trust capital (the remaindermen) and those entitled to the income arising from it (the life tenant). These rules have been developed by the courts and by statute. In essence, the thinking was that a testator, had the point been considered, would probably have expected the trustees to preserve that balance. Equity therefore stepped in to assume that intention on the testator’s behalf. As apportionment was presumed, there was no need to produce evidence of an intention to include the rule (although evidence would be required to overturn the...

FORTHCOMING CHANGE relating to changes to APR and BPR : At the Autumn Budget 2024 on 30 October 2024, the government set out plans to substantially cut the APR and BPR available on qualifying property from 6 April 2026 (including lifetime gifts made on or after 30 October 2024 where the donor dies on or after 6 April 2026). After consultation and subsequent announcements, the existing 100% relief will no longer apply to the full value of eligible agricultural or business property. It will be limited to the first £2.5m of combined value, with any remaining qualifying property attracting relief at only 50%. See News Analyses: Autumn Budget 2024— Private Client analysis— Inheritance tax and Change in the approach to IHT planning for farmers. See also: Policy paper: Agricultural property relief and business property relief changes (updated 9 January...

FORTHCOMING CHANGE : The Trusts and Succession ( Scotland) Act 2024 obtained Royal Assent on 30 January 2024, representing the first overhaul of Scottish trusts law in more than a century since the Trusts ( Scotland) Act 1921. The trusts elements will only commence once Scottish Ministers make the necessary secondary legislation to bring them into force, while certain succession provisions took effect on 30 April 2024. A summary of the key reforms aimed at modernising the framework appears in News Analysis: Trusts and Succession ( Scotland) Bill passed. Practice Notes covering Scottish trusts and succession topics will be updated further to align with this new legislation. What is a discretionary trust? A discretionary trust or discretionary settlement arises where a person—or persons—(traditionally termed the truster or trusters in Scots law, though the English terminology of ‘settlor(s)’ is becoming more commonly adopted) transfers or settles...

Although foundations are commonly linked with Liechtenstein, they also exist across numerous other jurisdictions, including Austria, Switzerland, Panama, St Kitts, Seychelles, Nevis, Anguilla, Malta and the Netherlands Antilles. In recent years, various common law jurisdictions have introduced foundation statutes, among them Jersey, Guernsey, the Bahamas and the Isle of Man. For an overview of foundations, covering key features and applications, see Practice Note: Private foundations—a summary. General characterisation of foundations Where a foundation exhibits features of more than one English law entity, it is essential to determine the English law entity that most closely mirrors the foundation. This approach was endorsed by the Court of Appeal in Memec plc v IRC, in which the question arose as to whether a German silent partnership ought to be treated, for UK tax purposes, as a partnership. In performing the...

The framework for execution of documents under Scots law is set out in the Requirements of Writing ( Scotland) Act 1995 ( RW( S) A 1995) and the Legal Writings ( Counterparts and Delivery) ( Scotland) Act 2015 ( LW( CD)( S) A 2015). This Practice Note reviews both the traditional approach to execution and execution by counterpart under Scots law. Contracts or obligations that must be in writing In Scotland, the default position is that a contract, a unilateral obligation, or a trust can be constituted without writing. Writing is, however, necessary for the following exceptions to that rule: contracts, or unilateral undertakings, to create, transfer, vary or extinguish a real right in land (excluding tenancies or rights of occupation for less than a year and private residential tenancies) the creation, transfer, variation or termination of a real right in land an agreement between...