So, you’ve been made a trustee – what now? The key word is trust. You have been entrusted to look after assets on behalf of a beneficiary or number of beneficiaries.<\/p>\n
With great power, however, comes great responsibility. As trustee you are accountable for keeping those assets safe, possibly investing those assets and making sure that they last for the lifetime of the trust or are used to benefit those listed in the trust deed.<\/p>\n
The risks and responsibilities of being a trustee can be a daunting prospect, especially if you\u2019re not familiar with the obligations of this role. It is worth having a conversation with an advisor <\/a>who can help to point you in the right direction or assist with the day-to-day management of the trust.<\/p>\n This may be in the form of a will trust (assets left on trust when somebody dies) or in the form of a settlement deed (a trust created during someone\u2019s lifetime). This will advise you as trustee not only of who should benefit, but also of any powers or limitations \u2013 for instance, restrictions on investment of the trust funds. Trustees\u2019 legal duties are laid out under the Trustee Act 2000<\/a> (England and Wales)\/Trustee Act (Northern Ireland) 2001.<\/a><\/p>\n Although not legally binding, a letter of wishes <\/span> often gives a personal insight into the reasons behind the trust and provides a greater perspective than the deed alone. It might be that one of the beneficiaries is particularly vulnerable and before distributions are made to them, extra care needs to be taken to ensure that it is used as intended.<\/p>\n Different trusts have different tax reporting obligations and are subject to different tax rates depending on the wording of the settlement and the underlying beneficial interests. It is worth obtaining advice in this regard, as it will be your duty to deal with the tax compliance issues \u2013 or the financial penalties for failing to do so. But panic not, if you do not feel that you can competently register the trust with His Majesty\u2019s Revenue and Customs \u2018HMRC<\/a>,\u2019 complete trust tax returns or keep up with the ongoing changes to tax regulations, then as trustee you can delegate this function to a suitable professional (whose charges would be a direct expense, who can charge their services directly to the trust).<\/p>\n You should keep accounts to clearly record the split of assets and that the correct entitlements are paid from the right source. For instance, some beneficiaries are only entitled to the income of a trust, which would mean that they would receive the dividends and interest generated on stocks and shares but would not have any entitlement to the stocks and shares themselves, nor the sale proceeds of these. Preparing accounts can reduce the possibility of disgruntled beneficiaries later down the line. It can also provide a clear record to HMRC of those funds taxable to Income Tax or capital taxes such as Capital Gains Tax and Inheritance Tax.. Again a qualified advisor<\/a> can help with this.<\/p>\n Delegate your investment management function to reduce risk and provide diversification where appropriate. Where a Discretionary Fund Manager is employed to help with the trust funds, an investment policy statement will need to be drafted to ensure that the investment manager is aware of any restrictions, the risk profile of the family and the need to balance the interests of the beneficiaries.<\/p>\n Where there is a property, you will need to make sure that it is insured and that the insurers are noting the trustees\u2019 interests. Arrange for periodic visits to ensure that the property is maintained and not becoming neglected or dilapidated. If there is a life tenant (a beneficiary entitled to stay at the property), see that they are upholding any duties imposed under the trust, which might include meeting the costs of repair and insurance.<\/p>\n For example, the specific dates when beneficiaries become entitled (known as vestings), i.e. upon attaining a certain age; ten-year anniversaries (for the purposes of periodic inheritance tax charges in particular trusts); and agreed distributions from the trust.<\/p>\n In order to make informed decisions in the best interest of the beneficiaries, it is advisable to hold regular meetings with your co-trustee(s), advisor, investment manager, independent financial advisors and where appropriate, beneficiaries. You would be advised to minute your decisions in order to document that you have made the necessary considerations.<\/p>\n Don\u2019t just sit on the money until the end of the trust\u2019s life. Be proactive to find out what the needs of the family are, if any, and whether the trust can assist. Additional considerations may need to be made where vulnerable beneficiaries are to receive funds. You may need to make enquiries about any benefits that they may receive (which can be disrupted if personal savings thresholds are exceeded).<\/p>\n Importantly, if you\u2019re unsure or need assistance with the performance of your duties in your new role, just ask<\/a>!<\/p>\nTen tips to get you started<\/h2>\n
1. Follow the terms of the trust deed<\/h3>\n
2. Check whether there is a letter of wishes<\/h3>\n
3. Find out the tax treatment of the trust<\/h3>\n
4. Keep clear and detailed accounts<\/h3>\n
5. Consider whether investments should be actively managed<\/h3>\n
6. Make sure property is insured<\/h3>\n
7. Diarise important dates<\/h3>\n
8. Hold regular meetings<\/h3>\n
9. Be proactive<\/h3>\n
10. Just ask!<\/h3>\n
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