Estate Planning

The importance of appointing the right trustee

Estate planning is a task that everyone, not just the very wealthy, should regularly revisit. Around 31 million people in the UK  don’t have a Will, but there are other powerful tools that can work alongside or as part of a Will to ensure your assets pass on to your loved ones as you wish. Trusts, in particular, can be very useful. Steve Wright, our Estates Director, takes a look at Trusts, the role of a Trustee and the duties and responsibilities involved.

What is a Trust?

A Trust can be created during your lifetime or be incorporated in a Will. In essence a Trust holds your assets in a secure place for the benefit of your chosen benefactors. It’s sometimes helpful to think about them as a security box or treasure chest, in which your assets can be placed to keep them protected and, in some scenarios, potentially shielded from certain taxes. Tax saving is not the only reason why Trusts are created. They can also help protect funds for vulnerable beneficiaries including young children, those with a disability or others who find managing money difficult.

What is a Trustee?

Trustees are those who have control of the Trust and look after it. Anybody can act as a Trustee as long as they are over 18 and have full mental capacity. There is nothing to stop the person who gifted assets into a Trust during their lifetime from acting as a Trustee; in fact, this can be helpful if they wish to maintain some control over the assets being held in the Trust.

How to choose the right Trustee

When thinking about who to appoint as a Trustee, it’s important to find someone who will be able to put any personal goals aside and carefully follow the terms of the Trust.

Those who you might want to consider as a Trustee include:

Friends/family: A common option but one that should be carefully considered to avoid family disagreements. However, if you have a friend or family member you trust, the peace of mind this option offers can be worth it. Be sure they’re willing to take on the task and know the role you’re asking of them as it carries a great deal of responsibility.

Professional: With specialist knowledge and years of experience, an independent professional Trustee is not only able to reduce the burden on family Trustees but alleviate the stress of Trust administration. Appointing an impartial third party is a good option if you’d prefer to avoid any potential conflicts or don’t have a close family member or friend to take on the role.

Trustee duties and responsibilities

The role of a Trustee varies depending on the type of Trust, its specific provisions, and the assets held. Generally speaking, Trustees owe a duty to the beneficiaries of a Trust, meaning they must act honestly and in good faith and do not let their personal interests conflict with those of the beneficiaries. Here we explain the general duties of a Trustee that apply to most types of Trust.

To observe the terms of the Trust: Trustees must understand the terms outlined in the Trust to ensure the assets remain safe. This will involve being familiar with the Trust deed, the Trust assets, and the beneficiaries.

To provide information and keep accounts: Trustees must keep clear and up-to-date accounts for the Trust and provide beneficiaries with any relevant documents of information relating to the Trust when requested. Trustees may also be required to complete an annual Tax Return for the Trust.

To act unanimously: Trustees must act unanimously.

Act impartially between beneficiaries: At all times Trustees must act fairly and reasonably not allowing one beneficiary to suffer at the expense of another.

Take professional advice: It’s imperative that Trustees should take professional advice on matters such as tax, investments, and the law, if they do not possess the expertise themselves.

Administer the Trust: As per the Trust’s directions, a Trustee may need to distribute assets to beneficiaries.

Not to profit from the Trust: A lay Trustee cannot be paid for their role although they can be reimbursed for reasonable expenses.

Setting up a Trust is an important task, and it’s vital to seek advice and ensure any Trustees properly understand their role and responsibilities. Estate planning is an important part of any financial strategy, and it’s important to consider the options which work best for your family, in line with your own personal circumstances.

To discuss any aspects of Trusts, or any aspect of your Estate planning, please contact your nearest office.