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Understanding the Responsibilities of a Trustee

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The Role of a Trustee: A Jack Ross Guide

Introduction: What Does it Mean to be a Trustee?

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Being appointed as a trustee is a role that comes with significant legal responsibilities and duties. Whether you are a friend or family member chosen to manage a personal trust or a charity trustee, it is essential to understand what is expected of you. This article guides you through the duties and responsibilities of a trustee.

Trustee Defined: Who is a Trustee?

A trustee is a person or a trust company legally responsible for administering a trust. A trust is a legal arrangement wherein assets are held and managed for the benefit of others, known as beneficiaries. The person who creates the trust is known as the settlor.

Being a trustee is a big responsibility. It takes a lot of work and can last for many years, depending on the size and nature of the trust. When asked about taking on the role, it is very important that you understand precisely what is expected of you. This will be outlined in detail in the trust agreement. Unless explicitly stated in that document, you will not benefit financially from the trust. You should think very carefully about the financial, legal and moral responsibilities you are taking on and whether you can fulfil these duties properly. 

Key Duties of Trustees

Duty to Administer the Trust

The trustee must administer the trust as per the terms outlined in the trust deed. This duty involves managing the trust assets, making investments, and distributing assets to the beneficiaries as directed by the trust agreement.

Duty to Act in the Best Interests of Beneficiaries

The trustee must act in the best interest of all beneficiaries. The trustee must make decisions that are best for the trust and its beneficiaries. This includes taking reasonable care in managing the trust’s investments and assets.

Legal Duty to Safeguard Assets

Trustees also have a legal duty to safeguard the assets within the trust. This involves protecting the assets from loss or damage and ensuring they are invested wisely to benefit from the trust.

Duty to Distribute Assets Impartially

The trustee must distribute the assets within the trust impartially, ensuring that one beneficiary does not benefit at the expense of another. This essential duty requires the trustee to act impartially when making financial decisions.

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The Trust Agreement: Your Guiding Document

The trust agreement is a vital document that outlines the terms of the trust, including how assets should be distributed and invested. As a trustee, you must act in accordance with the trust agreement. You may need to consult legal advisors to ensure you fulfil your legal duties.

Duty to Make Informed Investment Decisions

One of the core duties of a trustee is to make well-informed investment decisions. This involves considering the best interest of the beneficiaries and the trust’s long-term objectives. Trustees are responsible for diversifying investments to minimise risk and must take reasonable care when selecting investment avenues.

Duty to Administer and Distribute

Trustees have the duty to administer and distribute assets in line with the trust deed. This includes not just financial assets but also property and other valuables that may be part of the trust fund. Trustees must distribute assets to beneficiaries in accordance with the terms set by the settlor.

The Discretionary Trust: A Special Case

In a discretionary trust, trustees have more leeway in deciding how assets are distributed among beneficiaries. Even in this case, the trustee must act impartially and in the best interests of all beneficiaries.

Duty to Answer Questions and Provide Information

Beneficiaries have the right to information about the trust. As a trustee, it is your duty to answer questions and provide relevant information to beneficiaries about the trust’s assets and how they are being managed.

The Importance of Record-Keeping

Detailed record-keeping is another essential trustee duty. Trustees must keep accurate records of all transactions, distributions, and investments related to the trust. This is particularly important for meeting legal requirements and for reporting to bodies like HMRC.

Trustee Liability: Know the Risks

While trustees are generally not personally liable for the trust’s debts, they can become liable if they act outside the scope of their legal duties or if they fail to administer the trust effectively.

Appointing New Trustees: What You Need to Know

In some instances, a trust deed may specify the process for appointing new trustees. Even if it does not, you may need to appoint a successor if you or another trustee is unable to continue fulfilling the duties. Trustees also need to consider the best interests of the beneficiaries when appointing a new trustee.

How Trustees Can Benefit from the Trust

While trustees generally do not benefit from the trust, there are exceptions. In some cases, the trust deed may authorise a trustee to benefit in specific ways, such as being paid for their services. However, trustees must always act in the best interests of the beneficiaries.

Duties and Responsibilities in Different Types of Trusts

Different types of trusts come with different sets of duties for trustees. For example, the duties of a charity trustee differ from those overseeing a personal trust. Understanding the specific duties and legal requirements of the type of trust you are managing is crucial.

Trustee’s Role in Tax Obligations

Trustees are responsible for ensuring that all tax obligations related to the trust are met. This involves filing necessary tax returns with HMRC and ensuring that the trust complies with all tax laws and regulations.

Trustee vs Third Parties: External Relations

Trustees may also interact with third parties, such as investment advisors or property managers, to administer the trust effectively. In such cases, trustees must act in the best interests of the trust and its beneficiaries.

Final Thoughts: The Trustee’s Lasting Impact

Being a trustee is a role that comes with substantial legal duties and ethical considerations. The decisions you make will have a lasting impact on the beneficiaries and the assets held within the trust. Therefore, it is crucial to take your responsibilities seriously and to seek professional advice when needed.

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The duties of a trustee depend on the type of trust you are involved with, however generally speaking they include having a legal responsibility for the trust assets, making sure you fulfil the beneficiaries’ wishes and interests, and acting in accordance with the trust deed and all legislation unless the trust terms override them. It is also essential for trustees to be mindful of their fiduciary responsibilities, as they can be held liable should any issues arise.

Yes, certain delegated tasks can be assigned by a charity trustee and are considered acceptable within reason. However, it is important for trustees not to delegate any decision that could result in an irrevocable change or breach of their legal responsibility. For further advice on delegation matters, please contact us at Jack Ross using the form below.

Before taking any action on behalf of this individual (who may or may not have died) it is essential that you confirm this first either through enquiries or obtaining experts’ advice – preferably both. This can help prevent costly errors being made due care must always be taken when acting for deceased persons.

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