Perhaps you have been asked to be a trustee or you are considering setting up a trust yourself. In either case, there are a few things you should know before deciding. Being a trustee requires a certain level of involvement. This blog post should hopefully give an insight into what is involved.
What does a trustee do?
The general role of a trustee is to administer trust property for the benefit of the trust’s beneficiaries. This will be in line with both the purposes set down in the trust deed and general trust law.
Anyone becoming a trustee should find out what their role will involve. This involves looking at the beneficiary’s requirements, the powers they would have, and the trust’s assets.
There is a general standard of care which governs what trustees’ do. The trust document can also include extra powers and duties. The general standard is trustees must carry out all their functions to a certain minimum standard. Trustees who do not could find themselves accused of acting in breach of the trust.
The Trustee Act 2000 lays down more specific duties of care. These relate to purchasing assets, appointing agents, insuring trust property, delegating duties. This requires a trustee to exercise such “skill and care as is reasonable in the circumstances.”
Do trustees need to invest the money in the trust?
The trustees should ensure the trust fund is invested properly. Trustees can usually invest the trust fund in the same way as if the trust assets were their own.
The Trustee Act 2000 states trustees must make sure any investment is suitable for the trust. They should also consider, where right, the need for diversification of investments. The suitability of different types of investments will depend on many factors. Trustees will also review the investments from time to time.
When dealing with investments, trustees have a duty to seek and consider proper advice. Trustees can also delegate their investment powers to professional asset managers.
What else do trustees have to do?
Trustees must decide from time to time how to distribute money to beneficiaries in line with terms of the trust. This should consider what distributions are appropriate, how to fund them, and taxes. The primary consideration is the interests of the beneficiaries.
Trustees must act in the best interests of the trust and manage the trust fund in a fair manner. This includes treating all beneficiaries the same and not favouring one over another.
The trustees must exercise the power for the purpose for which it was given. If the creator of the trust (known as the “settlor”) has left a Letter of Wishes to guide the trustees, they should seek guidance from this.
Trustees need to keep proper accounting records of the trust. It is also desirable for the trustees to have a written record of their decisions.
What if something goes wrong?
Trustees normally exercise their powers properly, but things can go wrong. Most modern trusts protect trustees from being liable for losses. This does not apply where it is found that a trustee has not acted honestly and in good faith for the benefit of the beneficiaries.
Where there is disagreement between trustees, one can be asked to retire or step down. This either allows the continuing trustees to act, or a new trustee can take the retiring trustee’s place. Where no agreement can be reached, a trustee must apply to the Court for a co-trustee to be removed.
A person should not agree to act as a trustee unless they have carefully considered the nature of the role. Trustee duties can be demanding, and they must always be exercised with care.
If any doubt exists about the scope of the role of the trustee or the responsibilities involved, legal advice from a suitably qualified solicitor should be sought as soon as possible.
If you want to know more, please feel free to book in a free no-obligation chat here or get in touch.
This guide is intended as an outline guide only. It is not intended to be exhaustive and reliance should not be placed on it without looking for more detailed advice from a professional advisor or solicitor considering your own circumstances. This guide is based on English law and practice in force at the date it was prepared.