What Is A Trustee?

Being a trustee is an important and trusted role. By agreeing to act as a trustee you have an obligation to administer the trust in accordance with the trust document (e.g. a Will). Head of Wills & Probate, Jo Robinson, discusses all you need to know about becoming a trustee in her latest blog…

The trust document sets out the terms of the trust and the powers and duties of the trustees. Statutory provisions also apply to the operation of the trust. The letter of wishes (if there is one) sets out the wishes of the settlor (the person creating the trust), but it is not legally binding.

The beneficiaries are the people who will benefit from the trust funds.

Trustee’s Duties

The trustees are subject to various legal duties. The main duties are set out below. In some cases they may be varied by the terms of the trust document.

• Observe the terms of the trust

It is the trustees’ responsibility to familiarise themselves with the interests of the beneficiaries under the trust and all the terms of the trust. They must act in accordance with the terms of the trust which are:

• Act in the best interests of the beneficiaries
• Duty to exercise reasonable care

The common law duty of care is the duty to take all those precautions which an ordinary prudent man of business would take in managing similar affairs of his own if he were minded to act for the benefit of other people for whom he felt morally bound to provide.

The statutory duty of care is to take such care and skill as is reasonable in the circumstances, having regard to certain factors.

• Duty not to profit from the trust
• Duty to act personally
• Duty to act unanimously
• Duty of confidentiality
• Duty to disclose information
• Duty to keep records and accounts

Tax & Regulatory Duties

It is the trustees’ responsibility to ensure that the trust is tax compliant eg by filing tax returns and paying tax. It is also the trustees’ duty to comply with all regulatory requirements, such as the disclosure of beneficial ownership information to HMRC.

How Should Requests From Beneficiaries For Distributions Be Dealt With?

This depends on the type of trust and who makes the request.

If the trust is a discretionary trust then the trustees have absolute discretion about distributions. The trustees must consider the beneficiaries request and act fairly, but this does not mean agreeing to the distribution and it does not mean treating the beneficiaries equally.

If the trust is a fixed interest trust or a beneficiary has a future entitlement, the trustees will need to consider whether the distribution is in the respective beneficiary’s best interests.

What Is A Breach Of Trust?

A breach of trust is the breach of duty imposed on a trustee by the trust document or by the law. It is an act or omission that is contrary to a trustee’s duties.

A trustee can be personally liable for a breach of trust ie a trustee could be sued personally. This is why it is important to obtained professional advice when it is needed.

Practical Points

Depending on the nature of the trust and what decisions the trustees need to make, they may have at least yearly or bi-yearly trustee meetings to;

• Review the trust investment performance
• Review the trust accounts, tax return, budget and distributions to beneficiaries
• Make decisions about distributions to beneficiaries
• Any other trust business, such as the appointment of investment managers or agents

Generally, an agenda will be circulated beforehand by the professional advisers or lead trustee. All decisions made at the trustee meetings should be documented and minutes kept.

Between the trustee meetings, the trust administration in relation to the above matters will be ongoing.