I have been asked to be a trustee, what does it mean? - The Law House Family Law Solicitors, London & Peterborough

I have been asked to be a trustee, what does it mean?

By in Wills, Trusts & Probate Category on August 10th, 2018

Who would be a trustee?

Being asked to be a trustee might feel like it is a good thing, a privilege or an honour but it can be an onerous task and not to be taken on lightly. You will have responsibilities to beneficiaries who may be minors and minors for a long period of time. You will also be responsible for assets such as property, cash, investments or other valuable items. Before you say a definite yes, the following is a summary of the terms, responsibilities and duties of a trustee.

Trusts and trustees

A “trustee” is a person who is legally responsible for assets held in a “trust”. A “trust” is a legal, binding arrangement that is used to protect assets, such as land, buildings or money for the benefit of the others who are called “beneficiaries” to the trust. Such assets are referred to as “trust property”. They can consist of such things as land or buildings, cash, stocks and shares and other investment products. The trustees are legally responsible for the assets held in the trust and are required to manage the trust. If they don’t look after the assets they will be held responsible for any loss or damage to the assets.

Trustees usually have guidance from the trust paperwork or documentation that was used to create the trust in the first place. In effect, the trustees have to carry out the wishes of the person who set up the trust and who put the assets were placed into trust. The person who set up the trust and whose assets were placed into trust is known as the “settlor”.

How do you get to be a trustee?

Trustees are normally appointed in the document which creates the trust. A trust is normally created either in a Will or in a legal document known as a “deed of trust” (sometimes called a “trust deed” or a “trust instrument”). If it is created by a person’s Will then the trust will only come into existence when the person who made the Will dies. If it is created when the settlor is living then it comes into effect when the person executes the trust documents and places the assets into the trust or in other words puts the assets into the hands of the trustees.

What does a trustee do?
A trustee has a number of roles:
  • Dealing with the trust property is accordance with the will or deed of trust. This will include making payments, either one off payments or regular payments to or on behalf of a beneficiary named in the trust deed;
  • Transferring or passing assets to the beneficiaries of the trust in accordance with the Will or trust deed;
  • Managing the trust on a day-to-day basis. Trustees will pay tax due on any income that the trust makes.  Trustees will pay chargeable gains on the assets ifthey have increased in value , sold or transferred;
  • You will need to make  decisions as to how to invest the trust property
  • Consider how the trust property is to be used;
  • Ensure that the trust property safe.
Trustee’s roles and duties?

A trustee is under a duty to act in accordance with the rules or terms of the trust deed. Not only that, the law also imposes a number of other duties on trustees. Some of the main duties of a trustee are as follows:

  • To act impartially. Trustees acts in the best interests of all of the beneficiaries of the trust and not just one beneficiary unless the trust deed allows;
  • To act with reasonable care and skill. Trustees are required to act with reasonable care and skill. Professional trustees such as an  solicitor or accountant have higher standards expected of them. Non professional person or lay trustees must act with reasonable care but no to the same standards as professional trustees;
  • To keep trust property safe and monitor the trust property. Trustees identify assets that are to be in the trust.  Trustees ensure trust assets are safe. The trustees, if they identify that moeny is owed to the trust act to recover such monies;
  • To review investments. Trustees usually review investments at least once a year.  Trustee’s cannot simply place the assets in trust and do nothing else until the trust ends. Assets, if left to themselves can, in additon to increasing in value can also fall in value.   Doing nothing with the assets is not acting in the best interests of the beneficiaries;
  • To keep records. Trustees keep records , showing what they have done, to show or prove that the trust has managed the trusts properly. The beneficiaries of the trust can come to you and ask to see any documentation. This is a right that beneficiaries have.
  • Not to benefit themselves.  Trustees, do not to profit from a trust, either directly or indirectly. You must not act in your own interests and you cannot charge for their time spent administrating the trust unless your are a professional trustee, for example a solicitor or an accountant.
Trustees also have powers?

Trustees will usually find out what powers they have either in the will or deed of trust. These powers allow them to make decisions as to what they do with the assets and how they deal with the trust assets. It is not unusual for them to have the following powers:

  • To invest monies held under the trust.
  • To delegate certain powers to a solicitor or an accountant. Trustees cannot delegate all their powers.
  • To insure trust property.
  • Professional trustees such as solicitors are paid for their work.

As said previously, accepting a role of trustee should not be entered into lightly. There are duties and responsibilities and if they are not carried out well can have consequences.If you have been asked to take up the role of trustee do your homework, look at the level of commitment it will take and not just in terms of time, a trust can last a long time.

You should also ask yourself things like how well you will get on with other trustees? What if there is conflict among the trustee and you can agree on the best way forward?  How will i cope  if there is conflict with the beneficiaries? What if the value of an asset is wiped out? There are lots of questions you should raise before taking on the role. Asking the right questions and considering potential pros and cons will put you in a good position to move forward.

If you have been asked to be a trustee or are thinking about setting up a trust and would like more information or advice then please call me on 020 3150 2525 or email me at eadams@thelawhouse.com