What is a Trust?
A Trust is created when you ask someone you trust (the Trustee) to hold assets for the benefit of someone else (the Beneficiaries), subject to the terms of the trust – which you can specify.
What is a Trustee?
A trustee is a person (or more often persons) chosen by the person creating the trust who is trusted to hold the assets for the beneficiaries for the duration of the trust. The choice of a trustee is an important one and it should be someone who your trust implicitly and who is honest, loyal and will act in good faith.
What does a Trustee do?
The trustee will be responsible for looking after the assets in the trust which may include managing, investing and insuring them. The trust documents may give the trustees the powers to decide when funds should be paid out of the trust, to which beneficiary and in what amount, or you can make provision in the trust documents to tell the trustees when they should do this.
The powers and duties of a trustee are quite wide so its always a good idea to seek specialist advice.
What are the Trustee’s duties?
Whilst the trustees are looking after the trust assets on behalf of the beneficiaries, they will do so subject to their fiduciary duties.
A fiduciary duty is a duty that arises in a relationship where one party owes a moral obligation to another and has been entrusted to act in the best interests of the other party.
The trustee will also need to ensure that they have taken control of the trust property, that they are acting impartially when making decisions, that they are acting in compliance with the terms of the trust and that they are demonstrating the correct standard of care.
The trustee’s role when looking after the trust assets is generally quite extensive and will include things like managing the trust, investing the assets, insuring the assets, making decisions about paying out income and capital, dealing with any tax and ensuring that the trust is registered on HMRC’s Trust Registration Service, amongst other things.
will also be responsible for dealing with the administrative tasks such as registering the trust with HMRC’s Trust Registration Service, filing tax returns and paying any tax due, amongst other things.
What duty of care does the Trustee owe?
Trustees must act in accordance with the appropriate duty of care. The statutory duty of care is found in the Trustee Act 2000, but there are also common law provisions which have arisen from case law that must be borne in mind. It is also important to note that the standard of care expected from a professional who professes to have specialist expertise in skills, is much higher than a lay person’s duty. But, having said that, a lay trustee can still be held in breach of trust.
What happens if a Trustee breaches their duty?
A breach occurs where a trustee hasn’t complied with their obligations imposed by the trust or the general law, which generally results in some sort of loss or damage to the beneficiaries.
If a trustee breaches their duties, then they can be held personally liable by the beneficiaries for the loss. The trustees will usually be required to pay a sum back into the trust to make up the loss, and possibly even interest or lost profits
Who can enforce the Trustee’s duties?
The beneficiaries will be able to enforce the obligations of a trustee against them, and if necessary, they may need to seek the court’s assistance with this. However, there are time limits for enforcing their rights against trustees.
It is also important to note that there are some limited defences which could be relied on by the trustees to protect themselves from liability.
For further information regarding the above or if you would like to discuss a Wills & Probate related query with one of the team, please call us on 0800 011 6666 or e-mail the team at email@example.com.