For most trustees, they will know that they are trustees as there will be a trust document that appoints them explicitly and sets out what their duties are. However, for others, they may not realise that they are trustees.
For example, if you are appointed an executor in a will over someone’s estate, you are also a trustee. Others may not realise what their role entails. Some are surprised to learn that a number of legislative provisions apply automatically to the role of trustee and it is not enough to claim ignorance to these rules.
Here are 5 top tips that you should consider if you are a trustee.
1. Fiduciary Duties
The first matter to consider is that trustees are in a powerful position as their role is often to protect assets for beneficiaries. When we say that trustees owe fiduciary duties to the beneficiaries, we are saying that they must be trustworthy, as the name suggests, honest, act with integrity and transparent.
Trustees cannot benefit from their position as trustee, for example making a profit or use their position to advance their own agenda. Ultimately, if you were chosen as a trustee by a loved one, they expect you to act in the best interests of the beneficiaries.
2. General Duties
The general duties build on the fiduciary duties and in particular, the need to be transparent about what you are doing. Therefore, there are also a number of administrative duties that trustees must comply with like keeping good accounts, preparing tax returns and paying tax.
Trustees also must act impartially between beneficiaries; they cannot favour one beneficiary over another without good reason.
Trustees also need to ensure that legally they comply with the terms of the trust and take control of assets. Ignorance is not a defence and trustees can be liable for negligence.
3. Powers
It is imperative for a trustee to understand what the trust document and the law allows them to do. There are both dispositive powers (like deciding who gets the trust property) and administrative powers (like, investing or insuring the trust property). The type of trust that you are a trustee of will limit or extend these powers and so it is worth considering this before you make any big decisions.
4. Remuneration
Usually, the starting position is that trustees, who are not acting in a professional capacity, cannot benefit from their position and therefore, cannot be paid for their work as trustees. However, reasonable expenses, for example legal or financial advice, can be paid out the trustees.
There are exceptions to this and what is defined as reasonable expenses is set out in law. It is worth getting advice about whether your expenses or proposed payments are allowed, especially in how it relates to your trust.
5. Get advice about investments
Finally, as trustees, you may be aware that you are entitled to invest the trust property that you are in charge of, as you would like. However, may not realise that you must get advice about how to invest the trust property.
If you do not get advice and then there is a loss, you may be liable to the beneficiaries for that loss. Whereas, if you got financial advice, as trustee, you would be protected from a claim regarding the loss. Also, when you do consider how you are to invest trust property, there are rules about how you are to approach the task of choosing what to invest in, so it is important you get advice to protect yourself.
These are some general points to consider if you a trustee. However, if you are a trustee and are unclear of the extent of your role, please get in touch and we would be happy to assist you further in ensuring that you are fulfilling your role properly.
If you have any questions or would like any further information on the content of this article, please do not hesitate to contact our Private Client team, by emailing [email protected] or calling us on 01737 854 500 and one of our team will be happy to assist.