If you wish to create a Trust or you are asked to become a Trustee we can help and advise. We are Trust experts.
People are sometimes flattered if they are asked to become a Trustee and do not necessarily think about the legal ramifications and significant obligations that are involved. It is not something to enter into lightly as it involves great responsibility.
We have a modern outlook however where the role of Trustee is concerned we still think Lord Hardwick put it well in 1747 when he said:
‘A trust is an office necessary in the concerns between man and man, and which, if faithfully discharged, is attended with no small degree of trouble and anxiety. It is an act of great kindness in anyone to accept it’ (Knight v Earl of Plymouth)
A SUMMARY OF TRUSTEES’ DUTIES
- Before accepting a Trust, Trustees should disclose any circumstances which may tempt them to exercise discretionary powers unfairly.
- Having accepted the Trust, Trustees must acquaint themselves, as soon as possible with the nature and circumstances of the Trust property, the terms of the Trust and the Trust documentation.
- If necessary, new Trustees must ensure that Trust property is properly transferred to them.
- Trustees must obey the directions of the Trust unless a variation is authorised by the Court (directions of a Trust may be modified by the consent of all the beneficiaries subject to circumstances).
- Trustees have a duty to act impartially between all of the beneficiaries.
- Trustees have duties in relation to the payment of outgoings from the capital and income of the Trust respectively.
- Trustees have a duty to exercise reasonable care.
- Trustees have a duty to act jointly where more than one (and subject to the specific provisions of the Trust).
- Trustees have a duty to act gratuitously (subject to certain exceptions and the terms of the Trust, normally applying to professional Trustees). Usually only a professional Trustee will be paid a fee for acting in this role. For ‘non-professionals’ the role is usually unpaid and the work may be considerable.
- Trustees have a duty not to profit by Trust property.
- Trustees have a duty to keep clear and accurate accounts of Trust property and to give beneficiaries full and accurate information.
As well as these general duties there are also statutory duties imposed by Law.
A SUMMARY OF POWERS ARISING FROM AND DUTIES IMPOSED BY THE TRUSTEE ACT 2000
- 1. The Duty of Care
The Trustee Act 2000 created a new statutory duty of care applicable to Trustees. Trustees must exercise such care and skill as is reasonable in the circumstances having regard in particular:-
(i) To any special knowledge or experience that they have or hold themselves out as having and
(ii) If they act as a Trustee in the course of a business or profession, to any special knowledge or experience that it is reasonable to expect of a person acting in the course of that kind of business or profession.
The statutory duty of care applies:-
(i) When exercising powers of investment.
(ii) When acquiring or managing land.
(iii) When appointing or reviewing the appointment of an agent, nominee or custodian.
(iv) In the compounding of liabilities.
(v) When insuring Trust property.
(vi) When dealing with reversionary interests, valuations and audits.
2. A General Power of Investment
(1) Subject to the Act, a Trustee may make any kind of investment that he could make if he absolutely owned the assets of the trust.
(2) This is called “the general power of investment”.
(3) The general power of investment does not permit a Trustee to make investments in land other than in loans secured on land subject to section 8 of the Act.
3. The Standard Investment Criteria
(1) In exercising any power of investment a Trustee must have regard to ‘the standard investment criteria’.
(2) A Trustee must from time to time review the investments of the Trust and consider whether, having regard to the standard investment criteria, they should be varied.
(3) The standard investment criteria, in relation to a Trust, are—
(a) The suitability to the Trust of investments of the same kind as any particular investment proposed to be made or retained and of that particular investment as an investment of that kind, and
(b) The need for diversification of investments of the Trust, in so far as is appropriate to the circumstances of the Trust.
4. Taking Advice
(1) Before exercising any power of investment a Trustee must usually obtain and consider proper advice about the way in which, having regard to the standard investment criteria, the power should be exercised.
(2) When reviewing the investments of the Trust, a Trustee must (unless the exception applies) obtain and consider proper advice about whether, having regard to the standard investment criteria, the investments should be varied.
(3) The exception is that a Trustee need not obtain such advice if he reasonably concludes that in all the circumstances it is unnecessary or inappropriate to do so.
(4) Proper advice is the advice of a person who is reasonably believed by the Trustee to be qualified to give it by his ability in and practical experience of financial and other matters relating to the proposed investment.
We always work closely with expert Financial and Investment Advisers when dealing with Trust matters.
5. A Power to acquire freehold and leasehold land
(1) A Trustee may acquire freehold or leasehold land in the United Kingdom—
(a) As an investment,
(b) For occupation by a beneficiary, or
(c) For any other reason.
(2) For the purpose of exercising his functions as a Trustee, a Trustee who acquires land under the Trustee Act, section 8, has all the powers of an absolute owner in relation to the land.
With all of this accepted and understood the role of Trustee can be a very rewarding one. We are expert Solicitors and look forward to helping you.