I Have Been Asked To Be A TrusteeWritten on September 28, 2016 by Kirk Rice LLP
Financial Services QuestionsThe Question:
What should I consider before being appointed as a trustee?
Kirk Rice LLP answers:
Discuss with the Settlor to understand their intentions and clarify any parts of the Trust Deed you do not understand. A Settlor will often provide guidance to their Trustees, ideally in their own hand, which you should be able to understand. The Trust Deed will set out the powers and duties the Settlor has given to the Trustees and will describe in what circumstances they must distribute income and/or capital and how the Trust is to be run. A newly appointed Trustee is obliged to check if there have been breaches of Trust (actions taken that are not provided for in the powers) and that these have been corrected. Beneficiaries (not minors) may absolve Trustees from responsibility for the consequences, but Trustees generally have to make good any loss to the Trust from their own resources.
Trustees must act solely in the interest of beneficiaries as if morally bound to do so. A beneficiary who is 18 years old (16 in Scotland) should be told of his or her interest in the Trust. Some Trusts do not specify individuals, but give Trustees discretion over whom to benefit. You should check that all Trustees are appointed correctly and that all assets are held in the names of all the Trustees. Also consider whether the Trust needs to manage assets, say a property, or an investment portfolio and if the Trust needs to pay fees to professionals for that. The Trust Deed may not provide for the payment of professional fees so all Trustees and possibly beneficiaries will have to agree this before arrangements are entered into.
The overriding duty of Trustees is to invest the Trust fund in the best interests of the beneficiaries. This will require decisions on investment risks, diversification of assets, the impact of tax and regular reviews according to the anticipated needs of beneficiaries. The law requires the Trustees to act prudently in achieving a real financial return. Trustees must ignore their and the beneficiaries’ political, social or moral views and endeavour to achieve the best return. A Trustee must not place themselves in a position in which their duties as a Trustee conflicts with their private interests. Trustees are responsible for keeping records to complete the Trust and estate tax returns and to pass information to beneficiaries.
For further details and explanations the following accountancy website is a good place to start:
www.icaew.com/en/membership/regulations-standards-and-guidance/practice-management/acting-as-a-trustee (Kirk Rice has no control or responsibility for the pages you are about to access, or to where any subsequent links may take you.)
Any reader interested in discussing this topic further can telephone Michael Powell on 01344 875000 or email info@kirkrice.co.uk
If you would like to receive Money Matters electronically, simply email info@kirkrice.co.uk stating mo0ney Matters in the subject heading and we will add you to the distribution list.
Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made. The FCA does not regulate tax and trust advice.
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