What do I need to know if I am a trustee?

Category: General

You might be unsure of your duties as a trustee and the procedures you must follow. Here are some crucial things you should be aware of if you’re a trustee.

Being a trustee entails taking charge of funds or property placed in a trust for another person, referred to as the “beneficiary,” by a person known as the “settlor.” You might need to decide how to use the assets or when to disperse them.

There are numerous justifications for creating a trust. It can be a successful strategy to pass on money, establish a family legacy, or gift assets to people who can’t manage them themselves.

Maybe you’re contemplating creating a trust to pass on or safeguard your wealth.

So, here are seven crucial things you should be aware of if you’re serving as a trustee.

The beneficiary’s best interests must guide your choices.

You must act in the beneficiary’s best interests as a trustee. When choosing how to use or divide the assets, you must consider both their needs and the terms of the trust agreement.

You might be sued if you don’t behave in the beneficiary’s best interests. As a result, it’s a good idea to document your choices and, if necessary, the rationale behind them.

You will not be able to profit from being a trustee.

You can’t benefit personally from the trust unless it provides specific arrangements for you to do so. As a result, you cannot receive payment from the trust for the work you are undertaking.

You may, however, write off some costs. These expenses are necessary to fulfil your duties for the trust effectively. Once more, make sure you keep detailed records.

You should carefully study the trust agreement.

The kind of trust involved and the trust agreement the settlor has created will determine how much discretion you have when making decisions.

When managing a discretionary trust, you often have the freedom to decide how and when to spend the assets. In other instances, the settlor might have left guidelines or put limitations in place, which you must adhere to.

You should carefully study the trust agreement and keep it handy while making decisions because it will specify what you may and cannot do.

You might be accountable for paying any taxes the trust must pay.

Some trusts have tax bills to pay, and you need to determine whether this applies to the trust you are involved with and pay them.

A trust may be subject to income tax, dividend tax, capital gains tax, and other taxes depending on the assets it holds and their value. You might be able to use allowances to pay less in taxes.

Understanding the trust’s tax liability can be challenging, but it’s an essential step if you want to prevent unforeseen expenses.

The trust might need to be registered.

Many trusts in the UK will need to register with the Trust Registration Service as of 1 September 2022. Your duty as a trustee might be to handle this.

Unless they are on the exclusion list, all “express trusts” in the UK must be registered, regardless of whether they are subject to tax.

Unlike trusts established by a court order or the law, express trusts are established by a settlor. This includes those established in a will. Therefore, it is likely that you will need to register the trust for which you are accountable.

You will be in charge of maintaining records.

A trustee’s responsibility includes maintaining documents detailing everything from tax liabilities to asset distribution. If disagreements with the beneficiary or tax queries arise, this evidence may prove to be priceless.

The required records should be kept for at least six years, but you should maintain them for as long as possible.

You can seek advice.

Taking care of a trust can be pretty demanding and overwhelming. Remember that you don’t have to do everything alone and may ask for help if needed.

After discussing your options with a legal expert, you may feel more at peace. A financial expert can also help you feel more confident that your financial choices suit the recipient when you’re making them.

If you’re a trustee, have inquiries regarding your responsibilities, or wish to create a trust on your own, feel free to book a free no-obligation chat here.

Get in touch

If you would like to learn more or book a no-obligation initial meeting, we would love to hear from you. Enter your details below and we will be in touch.

    Please read our Privacy Policy.