1. What is a trust?
A Trust is an arrangement where one or more people (the Trustees) hold property for another person or group of people (the Beneficiaries). The idea behind a Trust is the concept of duty; the Trustees are under a duty to deal with the property in the interests of the Beneficiaries. If they fail in this duty, they will be in breach of trust and the Beneficiaries can ask the Court to make sure the terms of the Trust are carried out.
2. What are the duties of a trustee?
- To read and understand the Will or Trust Deed that sets up the Trust
- To take reasonable care in carrying out your powers as a Trustee
- To act fairly between the Beneficiaries and not discriminate against a particular Beneficiary. With a Discretionary Trust, the Trustees must consider the interests of the Beneficiaries fairly and make a decision on reasoned grounds. As a Trustee, it is very important to keep records about what you decide to do
- To comply with the terms of the Trust. It is essential that you do not go outside the terms of the Trust as set out in the Will or Trust Deed. If you have any doubts, it is best to seek legal advice
- To provide information and accounts to Beneficiaries on request. The Beneficiaries can be asked to pay for the cost of producing documents
- To act unanimously, unless the Will or Trust Deed expressly states you do not have to
- To act without reward. As a Trustee, you cannot charge for your services unless you are a professional Trustee
- Not to make a secret profit from the Trust. This is unlikely, but it could apply if goods or services were supplied through the Trustees’ own business
- Not to purchase Trust property unless the Will or Trust Deed expressly states you are able to do this
3. What power does a Trustee have?
These depend on the terms of the Will or Trust Deed, but can include power to pay capital to a Beneficiary, to pay income to a Beneficiary, to delegate the investment of a Trust fund to an Agent or Manager, in certain situations, and to appoint an Attorney to act for a limited period.
4. What records should be kept?
Firstly, there is a duty to register the Trust with HMRC on the Trust Registration Service and to keep those records up to date. There are financial penalties if these rules are not complied with.
It is very important that you keep records. Examples of documents that should be kept include:
- Bank statements for current and deposit accounts
- Confirmation of interest paid into current and deposit accounts
- National savings bonds or certificates
- Certificates issued by Life Assurance companies
- Details of expenses paid by the Trustees
- Details of all the taxes paid by the Trust
It is vital to keep records of any important decisions made by the Trustees, including explanations of any payments made out of the Trust. It’s also wise to hold annual meetings to consider the Trust’s assets and the needs of the Beneficiaries, and to keep the Minutes of this meeting.
5. What are the most important points to remember as a trustee?
The most important points to remember are to make sure that any actions you take are within the terms of the Trust set up in the Will or Trust Deed, hold annual meetings and record your decisions about the Trust, keep records and plan ahead. If there’s a possibility that any of the Trustees might be unable to act as a Trustee in the future, either for reasons of age, ill-health or a change in their situation, you should obtain legal advice as to the best steps to take.
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