Lewis Thompson – solicitor in our Private Client team – discusses Trusts.

What is a trust?
A trust is an arrangement whereby assets (money, investments, property) are held by someone or by a group of people for the benefit of another person or group of people. The people responsible for looking after the assets are known as Trustees. A person who benefits from the assets in the trust is called a Beneficiary. Trusts are used for a number of different reasons. The main reason is often to reduce the amount of tax payable when someone dies leaving their estate to other people.

How is a trust created?
A person who puts assets into a trust is called the Settlor. The Settlor’s wishes for the trust are often recorded in their Will or in another document created during their life, known as a ‘trust deed’.

What does a Trustee do?
The main role of a Trustee is to ensure that the assets in the trust are properly managed and used for the benefit of the Beneficiaries. Trustees must act in the best interests of the Beneficiaries of the trust and must be involved in managing the trust assets.

What is the difference between a Trustee and an Executor?
An Executor is someone who is named in a Will and is responsible for administering the estate of someone who has died. An Executor will collect and cash in the assets in the estate, pay off any debts and tax which pay be payable and then distribute the assets according to the wishes of the deceased. Often a Will also creates an ongoing trust and the same people will be appointed as Executors and Trustees, however, the role for the Executors will end once the estate has been distributed.

What decisions can Trustees make in relation to the trust?
Trustees have powers to manage and make decisions in relation to the trust. The document that creates the trust (the Trust Deed) will set out some of the powers that the Trustees have but other powers are prescribed by law. Some of the powers that a Trustee has are to invest the assets in the trust, to insure the assets in the trust, to provide for Beneficiaries who are minors and to delegate to some of their duties to another person such as an accountant or financial advisor.

What am I responsible for as a Trustee? Is there anything that I must do?
Acting as a trustee is a big responsibility. The law imposes a range of duties on Trustees to ensure that they act appropriately. In particular, it prescribes that Trustees must act with reasonable skill and care when dealing with trust assets and they can be held to a higher level of accountability if they possess specialist skills or knowledge.

Some of the other duties that Trustees have are:

  • To act impartially between the Beneficiaries;
  • To make sure that they do not put themselves in a position where their own interests conflict with those of the Beneficiaries;
  • Take care when investing trust assets and seek advice from an independent advisor if necessary;
  • To distribute the trust assets in accordance with the Trust Deed (or Will); and
  • To provide information relating to the trust if asked to do so by a Beneficiary.

Can I be personally liable for decisions that I make as a Trustee?
Yes, Trustees can be personally liable to beneficiaries for breaches of duty or responsibility. It is for this reason that Trustees often seek advice from independent advisers to ensure that they are acting appropriately and in the best interests of the Beneficiaries. Trustees should regularly meet with their Co-Trustees to make decisions and review the trust position.

For more information about Lewis and his work, please click HERE.

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