Being asked to become a trustee is an important expression of trust. For this reason, it’s important to understand what exactly the duties and responsibilities of a trustee involve before accepting the role.
After setting up a trust and appointing beneficiaries to manage it, the “settlor” will usually draft a list of specific instructions. These instructions will often include exactly how they wish the trust to be managed, which may last many years. The trustee or trustees selected to carry out these instructions will be expected to do so in accordance with various legal requirements.
This guide sets out the duties and powers held by a trustee and all that the role entails.
What is a Trust?
A trust is a means of managing assets for a singular trust settlor or multiple individuals. This common legal arrangement allows the owner of certain assets, known as the trust settlor, to hand the responsibility for these assets over to a trusted group of people, known as the trustees.
The common assets to be managed are typically money, property, land and investments. There are many different types of trusts and each of them has their own specific way of being taxed.
The trust settlor is the individual who places the assets within a trust and is typically the person whom these assets belongs to. The trustees are responsible for managing this trust, whilst the beneficiaries are the people who will benefit from it.
There are many reasons why a trust may be set up, which include:
Instances in which the person is too young to handle a large sum of assets
Instances where a person is unable to handle assets due to being incapacitated
As a means of passing on assets when you’re alive
As a means of passing on assets when you die, referred to as a ‘will trust’ under the rules of inheritance
As a way of controlling and protecting valuable family assets
What Are Trustees’ Duties and Responsibilities?
In essence, the primary function of a trustee is to hold property for the benefit of the trust’s beneficiaries. Alongside this, trustees must adhere to the specific provisions of the Trust Deed and comply with the relevant laws.
There are multiple Trustee Acts which must be followed by the trustees. A trustee has been given a privileged position which they must respect by acting honestly and loyally towards the trust’s beneficiaries. If a trustee does not act in the best interests of the trust, adhere to the wishes set out in the Trust Deed and respect the needs of the beneficiaries, then they have failed to adequately carry out their duties.
The responsibilities of a trustee will generally include:
Familiarising themselves with the terms of the trust so that they can comply with the duties set out in the Trust Deed and take actions to meet the overall goal of the trust
Keeping up-to-date and accurate accounts for the trust so that any documents or information required by the trustees is available on demand
Acting unanimously at all times (unless it is specified otherwise within the Trust Deed)
Providing income for the beneficiaries whilst still maintaining the overall capital of the assets
Acting fairly and impartially between the separate beneficiaries and promoting common interest so that no one beneficiary suffers at the expense of another
Can a Trustee Be Removed or Replaced?
Failure to adhere to the duties and responsibilities associated with the role of a trustee could result in the beneficiaries suffering and the trustee being removed.
A trustee can be removed if the beneficiaries deem it to be appropriate to the best interests of the trust. A common example of this is the removal of a trustee who uses their powers for personal gain. The removal process will involve the beneficiaries applying to the court to have the trustee removed if they believe they are not working to serve the best interests of the trust, are negligent within their role or are failing to follow the guidelines set out by the Trust Deed.
If a trustee is removed, steps down or retires from their position, the remaining trustees or beneficiaries can appoint a replacement trustee to take up the position. The Court can also be used to appoint replacement trustees following the removal of a previous trustee.
What Happens If There Are Disagreements or the Trust is Mismanaged?
Trustee decisions usually have to be made unanimously. For this reason, disputes can occur when a particular individual feels strongly about a decision. Inheritance disputes, disagreements as to what the original settlor would have wanted and investment decisions are some of the many issues that may arise whilst managing a trust.
Whilst disagreements can be a major concern for trustees and beneficiaries, it may be difficult to outright remove someone from their position if they are seemingly still adhering to the Trust Deed and following legal guidelines. In such a circumstance, it is important to enlist legal advice as soon as possible so that the capital value of the trust is not at risk.
Smith Partnership’s Wills and probate solicitors offer the legal expertise needed to resolve any disagreement relating to a trust and find a resolution that benefits you. Trusts often contain substantial assets which are vital to the financial upkeep of the beneficiaries involved, and our specialist Contentious Probate team can negotiate the removal or replacement of trustees when a relationship is no longer tenable or negligence is involved, safeguarding your interests in the process.
Contact Our Contentious Probate Team
To find out how we can help you with any matter relating to trusts, don't hesitate to contact Smith Partnership’s specialist legal team today. Simply give us a call on 0330 123 1229, email us directly via firstname.lastname@example.org or complete our enquiry form.