A Trustee is someone who holds property on trust for another called the beneficiary. It is often the case that the Executors named in the Will are also appointed Trustees. It is usual practice to appoint at least two Trustees, when making a Will.
Trustees duties often consist of:
- To act in accordance with the Trust deed if one exists
- Acting impartially among beneficiaries
- Acting in the best interests of the beneficiaries
- Not make a personal gain
- Be accountable for their actions
- Keeping the beneficiaries updated
In the case of a Discretionary Trust (where the entitlement of the beneficiary is not fixed but is decided by the Trustees on a discretionary basis) the trust deed will set out the preferred beneficiaries. A letter of wishes provides guidance as to how much they should be given and in what circumstances. Trustees’ other responsibilities include:
- Informing HM Revenue and Customs that a discretionary trust has been set-up
- Dealing with tax returns to HM Revenue & Customs
- Paying any income due to the beneficiaries
- Paying any tax due on the trust
- Keeping accurate financial records and minutes of meetings with beneficiaries
- Investments are to be made with due care and diligence
- Making loans and keeping records of any loans made to beneficiaries
- Providing the beneficiaries with confirmation of how much income they have received from the trust and how much tax the Trustees have deducted as the beneficiaries may be able to claim the tax back
Trustees can be paid however this is only if it is expressly stated in the Trust deed.
In relation to liability, the Trustee is financially liable for any loss made following a bad decision to invest. However, such a loss is limited to anything that is in excess of the trust property they hold.
The Trustee can be almost anyone but is usually a solicitor, accountant or family member.
There are complex tax rules regarding discretionary trusts. Tax may be payable on creation, taking money out of the trust fund and on the ten year anniversary, any every ten years thereafter, of its creation. Advice should be taken when considering a discretionary trust.
