Following our previous updates on acting as an executor or attorney, this edition of Wealth Preservation Matters considers the role of a trustee and the importance of seeking legal advice when appointed as a trustee.
The role of a trustee is vital. When a person sets up a trust during their lifetime or through their Will, they will choose people to act as trustees. The trustees are responsible for managing all the assets in the trust and the ongoing administration of the trust fund. This can include:
- Ensuring all assets are invested and managed appropriately.
- Undertaking regular reviews of the trust fund.
- Considering the tax position of the trust and completing any necessary steps regarding HMRC registration and tax returns.
- Making distributions to the beneficiaries named under the terms of the trust.
The responsibilities outlined above apply to all trustees even if the trust fund may initially seem simple or small. The role of trustee can be complicated and if trustees do not comply with their legal duties and responsibilities, they will be in breach of these. This can lead to disgruntled beneficiaries and ultimately trustees can be removed from their role by the Court.
It is important for a trustee to seek legal advice to ensure that they have carried out their role correctly and have satisfied all their duties.
When a trustee is first appointed, they must familiarise themselves with the terms of the trust including who the beneficiaries are and how they may benefit. A legal professional can assist with explaining the terms and give a full breakdown of these so that the trustee is aware of these from the very start. Often, the most important provision in a trust deed states who is to benefit from the trust. It is important that the trustee not only understands who the beneficiaries are but also how and when they should benefit. Different types of trust will allow beneficiaries to benefit in different ways but if a distribution is made incorrectly, a trustee will be in breach of their duty and can be held personally liable.
Obtaining legal advice allows a trustee to be sure that the above and all other elements of trust administration are dealt with. This could include assistance with arranging regular reviews of the trust assets, setting up annual trustee meetings and minuting these in the correct way – duties which are often overlooked.
Trusts are becoming more common when considering estate planning and asset protection, but it is important to note that the role of a trustee continues to be a legal one and failure to carry out duties and responsibilities can result in legal consequences. Seeking legal advice as a trustee is essential to ensure that all aspects of trustee responsibilities have been fulfilled.