The powers and duties of a trustee can be neatly categorised between:
- Dispositive – how, and in what circumstances, a trustee can distribute trust income and/or capital
- Administrative – how the trust is to be run
When ‘running’ a trust, it’s a fundamental duty of a trustee to invest the trust fund so that the interests of the beneficiaries are enhanced; whether that be in terms of income or capital appreciation.
The duty of trustees in relation to investments is that they must use their powers in the best interests of both current and future beneficiaries.
Trustees can access a wide range of potential investments and which particular product, or combination of products is suitable, will depend on the specific requirements of each trust. It is important to consider the taxation treatment of the different investment options, with a view to maximising the returns for the beneficiaries.
Having decided on an appropriate investment, trustees should then periodically review the investments and consider not only their suitability but the need for diversification.
What other considerations are there for trustees?
Duty of investment
Trustees must invest the trust fund and not just simply sit on the cash. Assets must be acquired or retained in order to produce a financial return for the trust.
Duty of care
Trustees must avoid any undue risk in relation to the trust fund.
Personal views shouldn’t cloud judgement
Trustees must not let their political or other views affect the investment policy of the fund.
Duty to seek “proper” advice
Trustees have a duty to obtain and consider “proper advice” unless they conclude that it is unnecessary or inappropriate.
Keep accounts and records
HMRC guidance makes it clear that a record of trust income and expenses must be kept in order to complete the trust and estate tax return. This information must then be passed on to the beneficiaries.
Get in touch to find out more
At Springfield Financial Services Ltd our STEP (Society of Trust and Estate Practitioners) qualified advisers work in conjunction with our clients’ solicitors and accountants to provide investment management and advice to trustees.
If you’re a trustee and need some further guidance in order to fulfil your duties, our expert team would be delighted to assist you. To book an appointment, please call us on 01772 729742 or complete our online enquiry form.