Trust Registration Service consultation – a chance to end some absurdity?

The world of wills and probate has been in consultation mode lately. There's the second phase of the Law Commission's ongoing review of the law relating to wills, the focus this time being on electronic wills and the rule that wills are revoked by marriage and civil partnership. Then there's the Competition and Markets Authority's investigation into, amongst other things, unregulated will writing services. And it doesn’t end there, as there's also the Justice Committee's inquiry into probate registry delays.

All of these are highly relevant to the charity legacy sector, so please keep an eye on our website as, whilst the public-facing consultations are (largely) closed, we'll be reporting as the initiatives progress through the various stages and, potentially, into material changes in law and practice. One day, our world could be unrecognisable, with (perhaps) digital wills sailing through the probate registry process in seven to ten working days. But don't hold your breath – these things take time.   

HM Treasury's consultation on Trusts Registration Service

The one I was keen to cover– not least because it is still open (although only until 9 June 2024 – so be quick!) – is HM Treasury's consultation on the law that underpins the much-loved Trusts Registration Service (TRS).

This is just one part of the government's wider economic crime plan. You will all, I'm sure, remember a time when our trade media was alive with talk of the TRS. That eventually settled down as, whether we agree with them or not, we've all got used to the rules and have processes in place to ensure compliance.

For the record, the TRS comes from a good place, i.e. preventing international money laundering and terrorist financing, but the rules have led to what could be called unintended consequences. It can sometimes be difficult to imagine how compliance with certain aspects of the rules has any benefit to the fight against money laundering and terrorism.  

One of the rules relating to wills springs to mind, as it comes up a lot when charities are acting as personal representatives, and can cause delay and additional cost. As this is not intended to be an academic piece, I'm going to simplify and call it the requirement to register administrative trusts of residue when an estate remains in administration for over two years (yep – that really is the simplified version).

To be fair, the two years is reasonable – perhaps even generous – as most estates can be administered well within that timeframe. Where they are, the requirement is irrelevant. But, largely thanks to the external factors that influence estate administration timescales all being on a worsening trend in recent times, it is sadly not uncommon for estates still to be in administration at the two-year mark.

Potential reforms and the impact on charities

Parliament and HMRC cannot have had an easy time introducing and implementing the TRS, so I'm not taking aim at them here, but this requirement is, frankly, hard to live with.

How can it be that a will that says "I leave my whole estate to my trustees upon trust for Charities Aid Foundation absolutely" creates a money laundering and/or terrorist financing risk such that registration on the TRS is mandatory, whereas a will that says"I leave my whole estate to the Charities Aid Foundation absolutely' triggers no requirements whatsoever? I'm fairly sure there is no answer to that, beyond those unintended consequences again, i.e. those stemming from the way in which the underlying laws were drafted.

The good news is that HM Treasury recognises that the situation with TRS is not perfect and, despite not having been around for all that long in the grand scheme of things, is ripe for reform. One of the key themes of the consultation is reducing the administrative burden, and that is great to see, as the requirement that I'm focusing on here is nothing if it's not an administrative burden.

The example I've given is just one small part of a complex set of rules that go far beyond the administration of estates. It is therefore unsurprising that the proposals in the consultation document do not address this very specific point. However, the document does cover will trusts generally, and invites respondents to comment on the same, so it will inevitably be mentioned in some of the responses, and it may be that HM Treasury takes note. I wouldn’t want to place a bet on it, but there's a chance this pain point could be removed from the estate administration process.

In closing, it would also be nice to see the general exemption from registration enjoyed by charitable trusts extended to administrative trusts of residue where the residuary estate is left entirety to a charity (or charities).

HMRC have confirmed that this is not currently the case, but it would only take a small amendment to the rules to change that, and it would be of great benefit to charities. It would mean that, unless the residuary estate is shared with private individuals, this particular registration requirement would not hit charities at all, regardless of how long the administration of the estate takes.